Does switching bank accounts affect your credit score?

Whether you’re looking for better interest rates or hoping to earn a switching bonus, there can be advantages to changing banks. 

But before you open an account with a new bank, you should know that it can affect your credit score.  

If you’re unhappy with your bank or just want to take advantage of switching incentives on offer, it’s worth shopping around before switching. In this guide, we reveal how changing bank accounts could affect your credit score and your overall credit profile.

What is a current account?

A current account is used by most people for day-to-day banking, allowing you to deposit and withdraw cash, as well as manage and transfer your money. 

Usually, they are free to open although you may be charged for going overdrawn.  

Why would someone consider switching bank accounts? 

Various banks offer different services and perks and always hope to attract new customers by offering decent interest rates, useful features or even cash bonuses for switching.  

If you decide to switch, then you may be able to use the Current Account Switching Service to open an account with another bank within seven working days. 

Any time you open a new bank account, your new bank will look at your credit report before you can switch. 

The bank needs to do this to check your identity and assess the risk of lending money to you. This check can affect your credit score.  

Your actual ‘score’ or number is less important than your overall credit record, meaning the history of how you’ve managed your financial accounts.

If you’re planning to borrow in the future, potential lenders will look at both your credit report and score when deciding whether to lend to you. 

Mortgage lenders are less likely to be concerned about your credit score, as they use their own criteria to assess your creditworthiness.

But they will look at your credit record, and switching bank accounts can have an impact on this. 

What is the difference between a soft and hard credit check? 

There are two types of credit checks a lender will do: a soft check and a hard check. Most banks will perform the latter. 

We reveal how these credit checks work and how this affects your score. 

Soft credit check

This may be used to verify your identity. A soft credit check is also used by price comparison sites to provide you with quotes, or by most banks if you apply for an overdraft.  

A soft check will not appear on your credit report or impact your credit score.

Hard credit check

This type of credit check will appear on your credit report and affect your score for up to a year. 

When lenders perform a hard check, they review your credit record to assess how good you are at making payments on time.

This can affect how much money they are willing to lend you.  

Companies have to get your permission before performing a hard credit check.

If you are frequently having hard credit checks, your credit score won’t have time to recover, and it could imply you are struggling with your finances.

Although it’s important to limit the number of hard credit checks you have, the credit score impact for most people switching bank accounts will be negligible and short-lived.  

However, there are some situations where you might want to reconsider whether now is the best time to switch accounts. 

Are there any scenarios where you shouldn’t open a new bank account? 

If you plan on taking out a loan in the next year, you might want to avoid switching bank accounts. 

This is especially true if you’ve had hard checks on your account for other things, such as applying for a credit card. 

For example, if you’re hoping to be approved for a mortgage, you might want to avoid any hard credit checks, including switching bank accounts, for 12 months before you plan on applying. 

Your credit score will recover from any hard checks eventually, but it’s worth considering whether you have any essential credit applications coming beforehand.  

Can you open a bank account with only a soft credit check? 

Yes, some UK banks offer a current account with a soft credit check, including Starling, Monzo and Chase.  

But it’s worth flagging that if you want to access any additional features, you may then need a hard credit check - some banks will require one for an overdraft application, although most will use a soft credit check.

Get expert financial advice

Switching bank accounts can be a smart move, but the impact on your credit record isn’t always straightforward.

If you’re unsure whether now is the right time to switch, especially if you’re planning a major financial step like applying for a mortgage, seeking professional financial advice can give you clarity and confidence.

An adviser can help you weigh up the benefits against the risks and make the best decision for your circumstances.