Does Transferring Credit Card Balances Affect Credit Score

Does Transferring Credit Card Balances Affect Credit Score

Transferring a credit card balance can be a smart financial move, especially if you're looking to save on interest and manage your debt more effectively. In the UK, balance transfer credit cards often come with interest-free promotional periods, giving you the opportunity to repay what you owe without extra charges. But like any credit-related decision, it’s worth asking — does transferring a credit card balance affect your credit score?

The answer is yes, a balance transfer can affect your credit score, but the impact can be positive or negative depending on how you handle the process. This article explains exactly how balance transfers influence your credit report, what to watch out for, and how to use them to strengthen your financial position.

What Is a Balance Transfer

A balance transfer is when you move existing credit card debt from one card to another — ideally a card with a lower interest rate or a 0 percent introductory offer. It can help reduce how much you pay in interest, giving you breathing room to clear your debt faster.

For example, if you're paying 20 percent interest on £3,000 of credit card debt and switch to a card offering 0 percent interest for 18 months, you can focus on clearing the debt without additional charges. Most balance transfer cards charge a one-off transfer fee, usually between 1 and 3 percent.

How a Balance Transfer Can Affect Your Credit Score

A balance transfer can affect your credit score in several ways — some temporary and others longer-lasting.

1. Applying for a new card triggers a hard search

When you apply for a balance transfer card, the lender performs a hard credit check. This search appears on your credit report and may cause a small, short-term dip in your score. If you apply for several cards in a short period, it can make you look credit-hungry and reduce your score further.

2. Opening a new account changes your credit history

Opening a new credit account can slightly reduce the average age of your accounts, which may lower your score temporarily. However, this new account also adds to your available credit limit, which can work in your favour.

3. Improving credit utilisation

One of the biggest benefits of a balance transfer is that it can reduce your credit utilisation ratio — the percentage of credit you're using relative to your total credit limit. If you move your debt to a card with a higher limit, and keep your other cards open, your utilisation drops. This can have a positive impact on your credit score.

4. Closing old accounts could raise utilisation

Some people close their original card after transferring the balance. While this may help avoid temptation, it can also reduce your total available credit, increasing your utilisation ratio and potentially lowering your score. Keeping old accounts open with a zero balance (if there’s no fee) can help maintain a healthy ratio.

5. Missed payments harm your score

Balance transfer cards often require at least a minimum monthly payment. If you miss even one, you can lose the promotional 0 percent rate and damage your credit score. Always set up a direct debit to avoid this.

Real-World Example

Jade, 29, had £4,500 in credit card debt spread across two cards. She successfully applied for a 0 percent balance transfer card and moved the full balance. Her credit score dipped slightly due to the hard search but recovered within a few months. By keeping her old cards open and paying off the balance transfer on time, her credit utilisation dropped from 75 percent to 40 percent — and her Experian score increased by 42 points within six months.

Meanwhile, her friend Sean closed his old card straight after transferring the balance. This increased his utilisation and, combined with a recent car finance application, caused a short-term drop in his credit score.

Is a Balance Transfer Bad for Your Credit Score

No — not inherently. In fact, when used strategically, a balance transfer can help improve your credit score over time. The key is to:

• Avoid multiple credit applications

• Keep your credit utilisation low

• Make every payment on time

• Avoid running up new debt on old cards

• Maintain a consistent repayment plan

It's important to remember that any credit application can cause a short-term dip, but the long-term impact of lowering your debt and managing it well is much more significant.

Will Lenders See That You Did a Balance Transfer

Lenders can’t see that you’ve completed a balance transfer specifically, but they will see:

• That you’ve opened a new credit account

• The credit limit and balance on that account

• Your existing credit card balances

• Any increase or decrease in overall credit utilisation

• Your payment history on all accounts

So while they won’t see the words “balance transfer,” they will notice changes in your credit activity and assess whether you're managing your borrowing responsibly.

Tips for Managing a Balance Transfer Successfully

• Compare cards carefully before applying — look for the longest 0 percent period with the lowest fee

• Only transfer what you can realistically repay within the promotional window

• Set a monthly repayment plan that clears the balance before the interest-free period ends

• Set up a direct debit for at least the minimum payment

• Avoid using the new card for purchases, as these may not be interest-free

• Avoid applying for other credit at the same time, unless necessary

Final Thought

Transferring credit card balances can affect your credit score, but the impact is usually minor and often positive in the long run. A well-managed balance transfer can reduce your interest costs, lower your credit utilisation and help you get out of debt faster — all of which support a stronger credit profile.

Like any financial tool, it depends on how you use it. Plan carefully, make your payments on time and avoid falling into the trap of building up new debt. Done right, a balance transfer is not just a smart financial move — it can be a stepping stone to better credit health.