Here is a Secret about Balance Transfers and Credit Scores for 2012

So do balance transfers really affect credit scores? Well If you are working to improve your credit profile, and your goal is to be debt free in 2012, then it’s time to separate fact from fiction. I guess the only way to really answer this question is to say it “it depends.” The only way to accurately answer this question is to really not answer it, because of the fluctuation of credit scores and varying factors taken into consideration when your credit score is determined.

Now, it is possible to improve your credit score by making a zero balance transfer if you make sure you follow the right steps. It is also possible to hurt your credit score when you make a balance transfer if you don’t follow these certain steps.

Let’s start by making sure that you DON’T DO THIS

Never close the card that you are transferring your balance from. When you cancel or close your account there are a ton of negative things that can happen to you like reducing the amount of your available credit. To a lender it will appear as if you’re using more of your available credit, which is a factor that will hurt you when your credit score calculations are being made.

When you close your credit card account that you’ve had for a long time it will remove an active account with a history from your credit report. This is a big No-No especially if the one you are closing is one that you’ve had a long and positive history with.

Now that we understand what not to do, let’s talk about all of the positive effects a balance transfer can have in 2012, by using data from a free credit monitoring service.

When you consolidate your high interest balances onto your new credit card, while keeping your old credit card open it gives you a great advantage for improving your credit score. Let’s say we transfer $1700 in debt to a new card with a $5500 credit limit. According to the score estimator your credit score would improve by an average of three points. It will have no effect from one company, a 2 point increase from another and a 7 point improvement from the third credit bureau, averaging out to become a three point increase!

By consolidating most of your high interest balances and being able to pay off some debt, our last example showed how you can simultaneously pay down 20% of your debt while improving your credit score by 3 points. So now you see, when you’re making a balance transfer it can also have a positive effect on your credit score.

Another great tool you can use is a free credit monitoring trial with a credit estimator to see how your balance transfer in 2012 will affect your credit score. The ability to maintain a high credit score can take a back seat, because by not doing a balance transfer it may cost you hundreds of dollars in interest that you can avoid by using a zero balance transfer card.

Lastly, here is one great tip for improving your credit score in 2012.  At the end of every month make your payments before the due date, this will lower the amount of debt that they report and will increase your credit score by a few points, or more depending on how much you pay!