Does switching banks affect your credit score?

Switching banks has been made easier than ever, but could it harm your ability to be approved for credit in the future?

Last updated:

Switching banks will have an impact on your credit score, as your new bank will run a credit check before approving your application.

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 will be visible for up to seven years.

Will switching banks affect my chances of getting a loan?

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.

LOQBOX

Build your credit history while you save with LOQBOX

  • Choose what you want to save – from £20 to £200 a month
  • Build your credit history with the credit reference agencies
  • Leave with an improved credit history, plus all your savings
Promoted

Using the 7-day switching service

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.

Do

  • Search for the best deal before switching banks
  • Switch using the seven-day switching service

Don’t

  • Apply for an overdraft or credit card if you don’t need it
  • Switch banks too regularly
  • Switch banks if you’re about to apply for a large loan

Robert's loan application and his credit score

In the middle of saving for a mortgage deposit, Robert discovered a bank account which paid a better interest rate on in-credit balances.

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.

The bottom line

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.

Frequently asked questions

How different factors can affect your credit score

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

2 Responses

  1. Default Gravatar
    JoNovember 26, 2019

    Can I switch banks if I have a loan still to pay?

    • Avatarfinder Customer Care
      TomNovember 28, 2019Staff

      Hi Jo,

      Thanks for your question.

      You’ll generally be able to switch your current account to another bank even if you’re still repaying a loan with your original bank. If your existing bank’s loans are only available to existing customers, however, then it may not allow you to keep the loan open when you switch. If in doubt, drop your existing bank a line to confirm.

      Under the Current Account Switch Service guarantee (CASS) your new bank will switch your direct debits across to your new account, so that if your loan is repaid by direct debits from your current account, these will continue as normal when you switch.

      If you simply want to open a new current or savings account with a different bank, you should be free to do so without it affecting your existing loan.

      If you want to move the loan from one bank to another because it’s offering a better rate, this is also possible. Basically you apply for a loan with the new bank that covers the amount you still need to repay on your original loan and then use the new funds to pay off the original loan. You will then continue to make repayments on the new loan instead.

      Please be aware that you may be charged a fee for paying off your original loan early, or you may pay up to two months’ interest on your outstanding balance beyond the date on which you request to close the loan. If the new loan has a higher rate or a longer loan term you may also end up paying more interest overall.

      I hope this answers your question, but feel free to get in touch if you need any more information.

      Regards,

      Tom

Go to site