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Switching banks will have an impact on your credit score, as your new bank will run a credit check before approving your application.
The fact you switched banks won’t appear on your credit file, but the credit check will be visible for up to seven years.
A credit check will reduce your credit score, although among most lenders the impact on your score is believed to be minimal.
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 may 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 on applying for a big 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 of time 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.
It’s efficient to switch banks using the seven-day switching service. This cuts down hassle as your new bank organises everything.
It also reduces the chances of an error being made switching your direct debits and standing orders.
If you miss a direct debit payment as a result of a botched switch, this will harm your credit report.
He was aware that switching banks would affect his credit score slightly, but as he didn’t plan to apply for at least a year, he decided the extra interest was worth switching for.
The added interest helped him save for a mortgage deposit quicker, and his mortgage application was still approved, due to all the other actions he was taking to improve his credit score.
Switching bank accounts does 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 big loan.
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