Is it a good idea to transfer one large credit debt into several new smaller credit balances to improve your credit score?

Answer 1

This is the opposite of what most people try to do. The idea of having debt on a single card is appealing because it is easy to keep up with due dates when your debt is consolidated in one account.

If your biggest priority is improving your credit, then there is one condition that could cause your score to increase by doing this. The credit utilization rate of that one card is likely very high, while the other cards are low.

If you can distribute the debt so that none of your cards has a credit utilization rate above 30% or so, then it is likely that your credit score could increase slightly. However, since your overall credit utilization rate would go unchanged, it would not affect your credit score as much as you might think.

One main reason why you should reconsider doing this is the 3% balance transfer fee that you might incur. That, plus the challenge of keeping up payments on multiple debts makes this a bad option. The cons outweigh the pros.

Try doing a search for "credit utilization rate" for more info.