Does Switching Banks Affect Credit Scores?

If you're fed up with disappointing interest rates on savings, high overdraft fees or a lack of per

Updated: June 30, 2024
Connor Sephton

Written By

Connor Sephton

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If you're fed up with disappointing interest rates on savings, high overdraft fees or a lack of perks, you might be looking to move your money to a different bank.

The Current Account Switching Service means it's never been easier to do this — but there's one thing you might be worried about: a negative impact on your credit rating.

But is this actually a risk you need to consider? Our quick and easy guide will tell you everything you need to know.

What is a Credit Score?

These reports offer an in-depth look at your financial history — including credit card balances, past loans, missed bill payments, past bankruptcies, and if you're on the electoral register.

Each factor is brought together to calculate your credit score. Lenders may use this to decide whether to approve applications for things like mortgages and overdrafts.

There are three credit referencing agencies in the UK: Experian, Equifax and TransUnion. Each has a slightly different way of calculating your score. And while Experian's rating goes from 0 to 999, Equifax runs on a smaller scale of 0 to 700.

Does Switching Banks Affect Credit Score?

As long as you're not making a regular habit of moving from one bank to another, Experian says switching accounts “should only lower your credit score temporarily”.

It's a much bigger problem if you're continually bouncing around in search of the best deals, as your rating won't have an opportunity to recover.

Direct Potential Impacts on Credit Score

There are a couple of things to be aware of.

When opening a new account, a soft credit check is typically needed. This won't affect your score, and isn't going to be visible to lenders in the future.

However, if you've also requested an overdraft or a new credit card, the bank will likely perform a hard credit check that'll leave a lasting mark on your report. Too many of these can drag your rating down.

Something else worth considering is that older accounts can also have a positive effect on your score — primarily because they can show you have a long history of responsible lending with that particular bank.

Indirect Impacts on Credit Score

The most important thing to check when your new bank account is up and running is whether all of the Direct Debits and standing orders are correct.

There's a slight chance that a mortgage repayment here or a gas bill there could be lost in the shuffle. Missed payments or arrears might end up being noted on your credit report afterwards.

How to Switch Bank Accounts?

Because of the Account Switch Service Guarantee, moving banks involves a lot less hassle than it used to.

While your new bank will be responsible for transferring over your balance and ensuring your Direct Debits are unaffected, the old provider's job is to close the account you no longer want.

Researching New Banks

It's worth taking a little time to shop around to find the best deal for new customers.

Switching bank account offers are pretty common — and can include cold, hard cash as an incentive, as well as cashback on purchases and access to exclusive savings rates.

There might be a few requirements to be eligible, such as depositing a minimum amount, making a few purchases, or setting up a certain number of standing orders.

Make an Application

Once you've found the bank that's right for you, it's time to make the jump. Do remember you'll need to verify your identity by providing ID such as a passport or driving licence — this is to clamp down on money laundering.

Applications can usually be made online and may only take a couple of minutes.

Fill Out Forms

To ensure the switch goes without a hitch, there are two forms that must be filled out.

One confirms that you're happy to move your account over to the new bank, while the other orders your old bank to close the existing account down.

As part of this process, you should confirm which day you want the switch to be finalised. The earliest time this can happen is after seven business days.

Start Spending

Once all of this is done and dusted, your new bank will pop a debit card to you in the post — as well as the login details you need for mobile banking apps.

You should also receive confirmation that your old bank account is now inactive.

What to Pay Attention to When Switching Banks to Avoid Affecting Your Credit Score?

Let's take a look at a few other top tips to ensure your credit rating remains intact once your new account is up and running.

Review Fees and Charges

Before opening up an overdraft or credit card with your new bank, make sure you compare the interest rates and fees charged by your old provider.

Some financial institutions have a higher cost of borrowing than others — and the last thing you want to do is fall behind on repayments.

Are They Signed Up? 

Verify whether your old and new bank alike are signed up with the Current Account Switching Service. If one isn't, you may need to move Direct Debits and balances across manually.

There's a decent chance this won't be a problem. According to CASS, more than 50 banks and building societies are now involved in its service.

Monitor Your Credit Balances

Credit utilization — in other words, how much of your credit limit you're using — can influence your score.

For example, if you have the ability to borrow £10,000 and have an outstanding balance of £8,000, this might send a signal that you're overly reliant on credit.

Generally speaking, it's recommended that you only use no more than 30% of the credit that's available to you.

Moving banks, and changes to your overdraft or credit card limits as a result, may affect this percentage slightly.

Check for Accuracy

Whether you're switching banks or not, it's always a good idea to check your credit score from time to time to make sure it's accurate.

If there are mistakes, you'll need to contact the financial institution that made the error directly to get it fixed. Alternatively, credit referencing agencies can help you launch a dispute.

Importance of Maintaining a Good Credit Score

Ensuring your credit rating is the best it can be delivers huge advantages.

For one, it allows you to gain access to more competitive interest rates on loans, and greater flexibility with credit cards and mortgages.

Being able to lower the cost of borrowing could potentially save you thousands of pounds a year.

Improving your credit score isn't as hard as it looks. Even something as simple as joining the electoral register will make a big difference.

Type of Bank Accounts That Can Impact Your Score

  • Current accounts will only affect your rating if you regularly use an unarranged overdraft — meaning your balance dips below zero. Authorised overdrafts will have less of an impact as long as you don't exceed pre-agreed limits — and could actually help boost your score when used responsibly.
  • Mortgages, while not specifically a bank account, matter too. The overall amount of debt on your home loan will be a factor here, as well as if you're up to date on payments.
  • Credit cards are often tied to our bank accounts, and influence your rating in several ways. Repeated applications for new cards can be a red flag, as well as making payments late. Remember: settling balances in full at the end of the month means you won't have to pay any interest — and only making minimum repayments will cause your debt to build.

Frequently Asked Questions

How Often Can You Switch Banks?

The short answer is as much as you like, with a big “but” attached. Every new account will go on your credit report, and too many of those can be off-putting to lenders.

And while there are eye-catching rewards for switching, they're often only available to first-time customers. So if you're returning after a few years away, you won't be eligible for perks.

Will Switching Banks Be Visible on My Credit File?

Potentially — especially if you get an overdraft or a credit card thrown in, too.

Will Switching Banks Affect My Chances of Getting a Loan?

This is unlikely. However, if you have been with your old bank for a very long time, the data they have about your spending habits and financial circumstances can increase your chance of getting accepted at a more competitive rate.

How Does Opening a Joint Bank Account Affect My Credit Score?

A lot of this depends on whether the person you're opening an account with has a good credit rating themselves.

Creating a lasting financial link with someone who has a poor reputation might ultimately affect your score, limiting your borrowing options and making credit more expensive.

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