Does switching banks affect your credit score?

With lucrative switching offers frequently being offered by competing banks, switching your current account can be a smart way to pocket some free cash or benefit from other juicy perks. However, when switching current accounts, a “hard” credit search might be carried out – which can impact your credit score.

Will switching banks be visible on my credit file?

The fact you switched banks won’t appear on your credit file, but the credit check the bank made at the time will be visible, typically for 12–24 months.

Banks usually carry out credit checks to verify you are who you say you are, but they can also be done to check your likelihood of being accepted for an overdraft.

Certain no-frills current accounts might not involve a credit check as part of the application process, as they typically don’t have an overdraft facility. These accounts are known as “basic bank accounts”. The word “basic” isn’t a guarantee there won’t be a credit check involved, but it can be a good clue.

Some banks might also only carry out a “soft” credit check, which can be used to verify your identity but won’t impact your credit score. Again, this is more likely to be the case if you’re applying for an account without an overdraft.

But in most cases, banks will carry out a “hard” credit check, which will leave a mark on your credit report and can cause your credit score to dip temporarily. This won’t usually be a problem unless you’re applying for more than one current account over a fairly short time.

It’s a great idea (and usually free) to get to know your own credit score and report, so you can see how you look to prospective lenders.

Will switching banks affect my chances of getting a loan?

A hard credit check reduces your credit score very slightly, but this effect is usually short-lived. Most of us will need to take out a mortgage, credit card or loan at some point, so credit checks are standard in almost all credit files.

Certainly, being credit-checked for a new bank account won’t be as harmful as missing a payment to a company you owe money to.

If you apply for an overdraft with your new bank account, this might impact your ability to get a loan, as lenders will consider the amount of credit you already have access to. The more credit you can already access, the tougher it will be to get more.

Some banks will offer you the opportunity to apply for their credit card at the same time as switching banks. This may involve a second credit check, as well as giving you greater access to credit. Both of these factors will affect your chances of getting a loan.

If you’re planning to apply for a large loan in the near future, it’s a good idea not to switch banks until after this loan has been approved.

Multiple credit checks in a short period is considered a red flag by many lenders, so switching many times could be more likely to impact your chances of being approved for future loans.

How does opening a joint bank account affect my credit score?

If you decide to open a bank account with someone else, this creates a financial association, and your credit files will be linked. If your partner has a poor credit score, your own credit score could be dragged down, making it harder for you to get credit again in the future.

Using the 7-day switching service

Using the 7-day switching service is the most efficient way to switch your bank account. Your new bank organises everything, making the process easy, reliable and hassle-free, and the switch should be completed within 7 working days.

It also guarantees that all payments from your old bank account, including direct debits and standing orders, will automatically be redirected to your new bank account, reducing the chances of an error being made. This is important, as missed payments can harm your credit score.

Nearly 50 banks and building societies are part of the 7-day switching service.

Bottom line

Switching bank accounts will usually affect your credit score, but the impact is typically so minimal that you should only worry about it if you’re about to apply for a mortgage or a loan. You can find the best switching deals in our guide.

Frequently asked questions

• Do lenders consider who I bank with?

  No, your choice of bank isn’t taken into account when lenders consider your creditworthiness.

• Can I switch banks if I’m currently in my overdraft?

  Yes, you can, but the new bank or building society will need to agree to the overdraft before you can switch. The new bank might also require you to have a good credit history. Switching to an account with a cheaper overdraft could help you to save hundreds of pounds in interest.

• How is my credit score affected if I open multiple bank accounts?

  Each time you open a bank account, a credit check will usually be carried out, and this will knock your credit score down by a few points. Although this is only temporary, if you apply for several bank accounts over a short period, this can have a much bigger impact on your credit score. So it’s generally better to space out applications by at least 3 months. Having multiple accounts with multiple overdrafts can also make it harder to get more credit in the future.

• What happens if something goes wrong when I switch bank accounts?

  The 7-day switching service is backed by the Current Account Switch Guarantee. If anything goes wrong and you incur any charges or interest on your old or new bank account, you’ll be refunded.

How different factors can affect your credit score

To make sure you get accurate and helpful information, this guide has been edited by Emily Herring as part of our fact-checking process.

Written by

Chris Lilly

Head of publishing

Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio

Chris's expertise

Chris has written 612 Finder guides across topics including:

• Loans & credit cards
• Building credit
• Financial health

Co-written by

Rachel Wait

Writer

Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio