Why Balance Transfers Harm Your Credit Score

Taking advantage of a balance-transfer offer to reduce your debt can affect your credit scores in a number of ways:

• Simply opening a new credit card to take advantage of the offer can lower your scores by about 5 points.





• Transferring your balance to a card with a lower limit can also hurt your scores, as can consolidating debt. The FICO formula typically would rather see $1,000 balances on five cards than a $5,000 balance on one card.





• You can compound the damage by closing the old credit card, since shutting down the account trims the amount of available credit that's used in the credit-scoring formula.
  

Source: MSN Money