Switching Incentives and Credit score

starkj73
starkj73 Posts: 1 Newbie
edited 29 October 2015 at 10:41AM in Budgeting & bank accounts
Apologies if question previously asked.

I have been with Smile for over 10 year and I am happy enough with the service. On the other hand £150 free sounds nice, but could this be bad for credit rating?

If I switch I would then have to tell a lender I have only been with my current bank for six months?

Comments

  • HappyMJ
    HappyMJ Posts: 21,115
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    starkj73 wrote: »
    Apologies if question previously asked.

    I have been with Smile for over 10 year and I am happy enough with the service. On the other hand £150 free sounds nice, but could this be bad for credit rating?

    If I switch I would then have to tell a lender I have only been with my current bank for six months?

    It's bad for the short term so if you're planning on applying for a mortgage soon then you may not want to do it.

    What I would do is open a donor account with a bank that does not have a switching bonus. I'd then open 2 savings accounts with Tesco and set up 2 direct debits to pull a couple of pounds from the donor account into the savings account then I would apply to switch the donor account to the new bank. You will then keep your Smile account intact and can say to mortgage lenders you have been with your bank for 10+ years.
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • Futuristic
    Futuristic Posts: 1,114
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    You'd run up multiple hard checks so it would for the short term affect your score.
  • Length of time with a bank is a positive factor when it comes to credit files and credit scoring but an otherwise strong credit file would not be ruined by a short amount of time with current bank.


    If you have other accounts on your credit file e.g. mortgage, credit cards, phone contract etc then potential lenders will look at the age of account across multiple products not just current account so again the impact of a short time with a current account provider will have a small impact.


    Having a lengthy relationship with Smile is positive but the account isn't really giving you anything in return for your loyalty so I would maybe keep it for account length but move your banking elsewhere.


    £150 is a good switching offer but you should also consider what on going incentives are out there. If you have some savings then accounts like TSB plus with 5% interest (up to £2k), joining incentive and 5% on contactless card transactions (up to £100 per month).


    If you spend a lot on household bills by direct debit then the new account from Nat West would be good to give you cash back on those but be ware of the monthly fee.


    The Halifax have a switching incentive but also pay an on-going £5 a month providing you pay in £750 a month and pay out two direct debits.


    It is good practice to have more than one account so that you always have access to funds if there was a card problem or banking systems problem.


    Good luck!
  • Archi_Bald
    Archi_Bald Posts: 9,681
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    Open a second Smile, or a Coop account, and switch that one.
  • thrope
    thrope Posts: 68
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    I have the same question. I have just switched personal and joint accounts so will not have long relationships with the new banks. I have an old account which I have had for 17 years or so, but hasn't had a transaction on it since 2013 and has a 4p balance. I was going to switch that to something else with an incentive.

    Does anyone have an idea of how much it contributes to the credit score? Would it be better to leave it there and open a new account just for switching (that also has an effect on credit score though - especially as I've opened 3 new accounts and a credit card in the last two weeks).
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