Does Switching Bank Accounts Affect Your Credit Rating?


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By Chloe Dickenson
Updated on Wednesday 16 December 2020

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In our detailed guide below, you’ll discover everything there is to know about changing banks, how switching credit cards can sometimes affect your credit score and how you can go about switching your accounts if that’s what you decide to do.

As a general rule, simply switching bank accounts shouldn’t affect your credit rating as your credit score is only determined by things that are related to credit. Therefore, as a typical bank account isn’t a form of credit, switching to another bank shouldn’t affect your credit score or credit rating.

Does switching credit cards affect credit rating?

There isn’t really a clear-cut answer as to whether switching credit cards affects your credit rating or not.

If you’ve looked after your credit cards well for a long time and consistently made your repayments on time over the years, then your credit score should be in a great position.

Does having multiple current accounts affect credit rating?

Having multiple bank accounts shouldn’t necessarily impact your credit rating too badly. Your credit score isn’t affected by the number of accounts you have, but how well you use them and how you perform when it comes to paying off your credit card, for example.

If you open multiple accounts around the same time, then you may see that your credit rating has dropped slightly due to the credit checks that the bank will perform. It should go back to normal again in no time, providing that you make all your repayments on time and there are no other issues that may negatively impact your credit rating.

Many people have multiple bank accounts for several different reasons. For example, couples who have their own individual accounts may also decide to set up a joint account with their other half in order to share their finances and savings.

Some people also like to have different bank accounts in order to differentiate their finances and to keep everything on track. For example, one account might be used for savings, whereas another may be used to pay for their mortgage and household bills.

Having multiple bank accounts will only affect your credit rating if you open numerous bank accounts within a short timeframe (which will then go back to normal again in no time) or if you let your bank balance become negative and go into your overdraft.

You might like: What Affects Your Credit Score?

How often can I switch current accounts?

There isn’t really a set limit on how often you can switch current accounts.

However, opening and closing a bank account repeatedly may soon start to affect your credit score as banks will check your credit history when applying for a new account which can impact your score. Doing this frequently may result in a decrease in your credit score.

Where possible, it’s a good idea to try and carry out as much research as possible before switching bank accounts so that you don't have to do it too often.

Is switching banks a good idea?

If you’re asking yourself the question of ‘should I switch banks?’, then you’ve come to the right place.

While the answer to this question isn’t always straightforward and is definitely something that you need to think about and decide for yourself, our advice will hopefully help you to make a decision that’s right for you.

If you’re not happy with your current bank, then switching might be a good idea. Providing that you’ve carried out plenty of research to ensure that your new bank account will be suitable for you and that you’ve paid off any overdrafts or outstanding bills you have, then switching banks isn't a bad idea.

Benefits of switching banks

While switching banks should only really be done when necessary, there are actually a few benefits of switching banks that you might like to take advantage of.

One of these advantages is that you might get to enjoy better savings rates. Some current accounts may provide you with an excellent savings account with great interest rates. If you’re looking to switch banks in order to help your savings, it’s definitely worth looking into one that can assist you with this.

Another benefit of switching banks is that you may be able to enjoy things such as cash rewards, discounts and various other incentives when you switch to a certain bank. These kinds of incentives are great if you’re already looking to switch banks and these things help to sway your decision between one provider or another, but a reward or discount offer shouldn’t be the main reason for you to switch banks.

If you’re someone who needs to make use of their overdraft fairly regularly, then it can be a good idea to switch to a bank that offers better or very little interest rates when it comes to having an overdraft so that you’re in a better financial position when it comes to paying it back.

Read more: Interest Rates Explained

Does being in an overdraft affect credit rating?

One thing you do need to look out for when switching banks is whether or not you have an outstanding overdraft.

Switching banks with an overdraft can be a tricky thing to navigate if you haven’t paid all your overdraft back. This can sometimes look bad against your credit rating, so it’s a good idea to try and make your repayments before you switch banks so there are no outstanding debts on your account.

If you make sure that you’ve paid off your overdraft before switching banks, then your credit rating shouldn’t be negatively affected.

Overall, switching bank accounts doesn’t have to affect your credit rating or credit score if you take care of your money, ensure that you carry out the necessary research before switching accounts and that you always endeavour to make your repayments on time.

If you'd like to check your credit score to get an idea of your current borrowing eligibility, tap the button below to get started. Alternatively, take a look at our guides below for further information and guidance.

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