Will Consolidating Debt with a Balance Transfer Hurt Your Credit?
Wondering if a balance transfer will hurt your credit rating? The answer is a bit complicated, so let’s walk through what will and could happen. Applying for the card will require a hard inquiry on your credit report, which will decrease your rating. We also strongly recommend that you close your old cards after successfully transferring their balances, and this can have a minor impact on your credit. However, if you don’t close those accounts, you’ll then have to be extremely careful to not run up balances on them again – you don’t want to end up doubling your debt.
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After successfully consolidating all your debt onto the low interest credit card, you can start focusing on getting it paid off. If you weren’t making payments on time before but are making them now, then your credit rating will start to improve. As the balance goes down, your credit utilization rate (i.e. how much you owe vs. your credit limit) will go down too, leading to more good gains. However, if you make a lot of new purchases on that card or others and don’t pay them off, then you could end up with even more debt than before. This will damage your credit more than anything else, and it’s unlikely that you’d qualify for another balance transfer. A debt consolidation loan would be problematic then too. If this happens, you’ll have to look at other options for credit card debt relief in Canada.