Does Changing Bank Affect Your Credit Score?

10th Sep 2024

Major high street banks are increasingly trying to attract customers from their competitors, and one of the key ways of doing this is to offer competitive switching bonuses. The industry saw nearly 434,000 bank switches in the last quarter of 2023, marking the busiest quarter in its 10-year history. Switching bank accounts has become easier over recent years, with many banks signed up to the Current Account Switch Guarantee, which promises not to leave you out of pocket if your switch doesn’t go through smoothly. One of the main barriers to switching is the worry that changing your bank account will have a negative effect on your credit score, but is this really true?

Benefits of Switching Banks

Switching bank accounts can offer several advantages. According to banking industry experts, the main reasons people switch include accessing better online or mobile banking services, attractive interest rates, superior customer service, and convenient branch locations. As discussed, many banks also offer incentives to move your account, which in some cases could be £250 or more. As few of us do our banking face to face in a branch, you also have the option of switching to one of the new styles of bank which do not have a presence on the high street and operate purely through websites and apps.

Potential Impact on Your Credit Score

One concern when switching banks is the potential impact on your credit score. Applying for a new current account can trigger a credit check, which leaves a 'hard footprint' on your credit report. Usually, these hard searches don’t cause too much difficulty, especially if you are not switching bank account every couple of months. If you are on the other hand making lots of applications for new bank accounts in a short period, this could be a sign of financial strain.

Is it Worth Being Loyal To Your Bank?

If you don’t want to switch, remaining loyal to your current bank can have its benefits. Some banks and financial institutions are trying to keep business by releasing accounts or offers which are exclusive to existing customers. Additionally, long-standing accounts contribute positively to your credit score, as credit agencies like Experian factor in the average age of accounts held – the higher the average age, the higher your score.

Is Switching Worth It?

While cash bonuses to switch your current account can be tempting, it's important to look at whether you are happy with your current bank account in terms of benefits, interest rates, and customer service. It might be that you’d be happier staying where you are. Also, consider any upcoming financial events, like a mortgage application, where maintaining a stable credit score might be more beneficial than switching accounts. Whether to switch banks depends on the balance between immediate benefits, such as switching bonuses, and the long-term advantages of staying with your current provider. Consider your financial goals and credit needs before making a decision.