Steps to help you get your balance transfer approved
1. Check your eligibility
The quickest and easiest way to check whether or not you’re likely to get approved is an “eligibility checker”. Most card issuers now give you the option to do an eligibility check for their credit cards on their websites. You’ll need to provide a minimal amount of information – typically your name, date of birth and your address details for the last three years. Unlike the application process, doing an eligibility check will not impact on your credit score.
The lender will run a “soft search” and give you an idea of your likelihood of approval, and in some cases the rate you’d be likely to receive (many lenders use “risk-based” pricing, and may offer a different rate to the advertised APR if they feel the applicant represents a higher risk).
This is probably the quickest, most definitive and most straightforward way to know whether your application has a good shot, but if the lender doesn’t offer this facility, or if you’re just being super-diligent, there are additional steps you may choose to take.
2. Check your credit score
Your credit score is crucial when it comes to credit applications because your credit history weighs heavily in a card provider’s approval or rejection of your application. While each company uses its own algorithm to decide how risky a borrower you are, certain clues in your credit report may help you predict how favourably your application will be considered.
Credit defaults, late payments, county court judgements (CCJs), an individual voluntary agreement (IVA) and bankruptcy are among credit report black marks that could negatively affect your balance transfer application. Sometimes there can be mistakes in your report too, which can and should be rectified by the credit reporting agencies.
Given the stakes, it’s important that you request your free credit report and a copy of your credit score yearly to stay on top of it. Making timely repayments, paying off your debt and other such actions can help improve a bad credit score. Spend time repairing what you can rather than being rejected and damaging your credit history even further.
3. Check your credit card balance
You are going to need to know your existing credit card balance when you apply for a balance transfer. It’s important to get the most updated figure of your card debt so that you can balance transfer the whole amount. Otherwise, you may be stuck with a balance and have difficulty closing off that account.
Checking your balance online can be the easiest way to get this information, but your online balance may not reflect the total amount you need to pay in order to clear the account. Some account or interest fees may be pending and only added to your statement at the end of the month, which wouldn’t show up online until the next billing cycle. It’s safer to call your current card provider and ask them for the actual figure to balance transfer.
4. Compare a range of cards
This step is possibly the most important one of all, as you won’t be able to find the right card for you if you don’t weigh up your options. First, you’ll want to compare the balance transfer offer. Most balance transfer credit cards offer a promotional rate of 0% that can last between 12 and 24 months, or sometimes even longer.
Consider the size of your debt and make sure you can pay off the entire balance before the promotional offer ends. When the offer ends, a revert standard interest rate will apply and is usually significantly high. Make sure that the length of the promotional period is long enough for you to pay off your debt in full, otherwise the remaining amount will continue to accrue interest.
You’ll also want to consider other features such as whether or not there is an annual fee, a balance transfer fee and other interest rates to make sure that the cost of the card doesn’t outweigh the savings you’ll earn from your balance transfer.
Should I click “apply” right now?
One major issue stands in your way: your fear of rejection.
To make sure that you’re not applying for an offer that won’t pan out, take a look at out how credit issuers evaluate your application. By nailing down this success criteria and doing an eligibility check, you can be the one calling the shots.
Once you’ve learned the factors that matter, you’ll have the tools to become a strong candidate and apply with confidence.
Recently applied and not sure about your application status?
Call your provider’s customer service line to find out if you’ve been approved or rejected, and why.
Will applying and getting denied for a balance transfer ruin your credit score?
Applying for a credit card typically involves a credit issuer performing what is called a “hard search” which could affect your credit score. However, neither applying nor getting rejected for a balance transfer will ruin your credit or make you ineligible for future cards.
What a “hard search” means
When you apply for a balance transfer card, the credit issuer will carry out what’s referred to as a hard search (or an “application” search). This means that it contacts one or more credit reference agencies – typically Experian, Equifax or TransUnion (formerly CallCredit) – to get your credit score and to check out your credit history.
A hard credit search will have a slight and usually short-lived negative impact on your credit score. If you’re applying for one card, the impact of this inquiry on your credit history should not be significant – potentially lowering your score by a few points. However, the more inquiries you make or applications you complete, the more points you can lose. Potential lenders may look at this and think you are having trouble securing credit.
Your credit report may also include soft searches which do not impact your credit score. Soft searches refer to those situations in which you see your own credit report or do an eligibility check for a credit card or loan through a provider. While these are recorded on your credit report, potential lenders cannot see them, so it won’t affect their decision on whether or not to lend you money.
What an application denial means for your score
While the hard search associated with an application for credit will be recorded on your credit file, the outcome of the application will not.
However, if an application for credit is followed by monthly repayments, then a lender can see that you were approved. If it’s not followed by monthly repayments, the lender can see that you didn’t take out the credit agreement, for one reason or another. Multiple applications for credit in a short space of time risk both hurting your credit score and putting off would-be lenders.
Can I use the same credit issuer to reduce debt?No. For example, let’s say you have a Royal Bank of Scotland card with a debt balance you can’t seem to reduce. You’re trying to get back on track and find an offer for a Natwest credit card with a balance transfer promotion. It’s a different card, so you qualify for the deal, right?
Unfortunately, this isn’t how it works. You will need to apply with a different credit issuer – that isn’t in the same banking group – to “move your debt”.
Credit issuers offer these deals because they’re competitors. They want to earn your business from a competing bank or bank group, not their own bank. To be considered for an offer, make sure you’re not applying to a company you already have an account with or one of its affiliates.
How do credit providers make application decisions?
When you’re considering a new balance transfer card, you might scan the list of perks and then start reading about requirements. Some of these will be easy to interpret, with clear numbers and simple bottom lines. However, as you move through the terms and conditions, things can get a little hazy.
Some of this is intentional: credit issuers have their own special formulas for making decisions, and parts of that process are unique. Also, each applicant comes to an issuer with different needs and histories. Because of this, a combination of “case evaluation” (which may work in your favour) and “set procedures” decides who qualifies – and who doesn’t.
Gauge the strength of your case for getting an approval by looking closely at the following eligibility factors.
Top 4 balance transfer eligibility factors
1. Credit history and score.
Your credit use, habits and history provide a record that allows credit issuers to see what you are like as a potential lending candidate. Are you someone with a long credit history? Do you typically make payments on time, or do you have loans in default? To an issuer, the answers indicate how you’ll behave as a future borrower.
Say you have an account balance but you pay on time and have had a credit card for a few years. Does this mean you have good credit?
The process of building good credit is a little more complicated than that. Let’s check out the hard numbers.
What qualifies as good credit?
Depending on your score, you’re said to have excellent, good, fair, poor or very poor credit:
|TransUnion (formerly Callcredit)||0-550
|1: Very poor
The better your score and repayment habits, the more money a company will be willing to loan you. Higher credit scores also tend to mean that your credit limit will be higher and your interest rate lower.
2. Amount and type of debt.
The balances you owe on other accounts is another hard number that credit issuers consider. In many cases, if you have a large balance it will be critical for you to have a good score to be eligible for the transfer. These factors will work together to prove to the lender that you will be able to pay off your debt balance.
The type of debt you have is another indicator of your ability to use credit responsibly. If you have a student loan with low payments and low interest that you consistently pay on time, it offers a stronger case than having three store credit cards with maxed-out limits.
While carrying different types of debt won’t prevent you from being approved for a balance transfer, to issuers it is another reflection of your spending habits.
What to know about debt and how to get help if you’re struggling
3. Debt-to-income ratio
Your debt-to-income ratio compares two numbers – the total amount you owe and the total amount you make – resulting in a number that indicates to an issuer how significant your debt is. It also shows how capable you are of paying off that debt.
Debt / Income = Debt-to-income ratio
For example, if you owe payments of £600 every month and your monthly income is £2,500, you would calculate your debt-to-income ratio like this:
£600 / £2,500 = 0.24
That 0.24 means that 24%, or about a quarter of your income, goes toward your debts.
|DEBT-TO-INCOME RATIO LEVELS|
A 24% debt-to-income ratio is typically in the debt-level danger zone.
A credit issuer will compare these two numbers to gauge your ability to repay the money you’ve borrowed and whether you can handle borrowing more.
It may sound like we’ve covered income already. But while it’s covered in the debit-to-income ratio, it’s a significant factor on its own. For instance, you may not have a large debt balance, but you could still be in a tight spot if your interest payments are high relative to your income.
Again, this factor is an indicator to a credit provider of how well you will manage to repay your debt with your new balance transfer credit card.
5 tips before taking the leap into a balance transfer application
- Research your options. Take a look at the balance transfer cards offers out there to find one that fits your unique financial situation.
- Plan your repayment strategy. You don’t want to sign up for an introductory 0% rate only to find that you’re unable to make the payments within 12 to 30 months once it reverts to the standard interest rate.
- Read the fine print carefully. Before you complete forms and send in your paperwork, research any complex credit jargon that still isn’t making sense.
- Weigh alternative options. You may be able to negotiate with the banks you already have an account with or take out a personal loan.
- Take time to ask questions. Ask the credit issuer to clarify the application process or credit terms, and don’t rush into a decision if you’re not ready.
Can I lie on my application?
It’s entirely possible for you to lie on your application, but that doesn’t mean you won’t get caught. The number of accounts you have, the amount of debt you’re in or your income may not be as desirable as you’d like, and fudging them might seem like a good way to overcome that. That’s almost certainly not the case though.
It’s more than likely your credit report will be checked and income verified, which will give away any lies fairly quickly. Getting caught stretching the truth could be more than just embarrassing as the provider may blacklist you from future applications. In short: it’s probably better to get declined for where you’re at than lie and wind up with even fewer options.
What to do when you get your balance transfer credit card
Once your application is approved you can expect your new card to arrive within 5–10 working days. After that it’s only a matter of activating your new card, which you can do online, over the phone or in person at a branch office. This step will initiate the balance transfer process, which can take up to two weeks to be processed, although most are done within a couple of days.
Use this time to tie up any loose ends with your old credit card. Check your old account for any other fees that may have popped up, pay them off and consider closing the account to avoid any future fees and temptation to use it again.
How to manage a new credit card after a balance transfer
Now that you’re ready to get started on this balance transfer application, take your time and follow the steps we’ve outlined. Doing your research well and planning ahead will increase your chances of a successful application. Remember: when in doubt, always ask for help.
Frequently asked questions