Switching current accounts

yorkiechick

I'm currently looking to switch my current account to take advantage of the switching incentives. How does it affect your credit score? 
We're also thinking of moving soon so don't want switching accounts to negatively effect mortgage prospects. I've been with my current bank for a long time which on my credit report seems to be a big plus.

grumbler

I wouldn't switch for a bonus the only long-standing current account if I were happy with it. Open a second account with the same bank and then switch it.

The only small short-term impact on your credit scoring will be two credit searches in the history, but it's likely that your current bank will open a new account without a search, especially if you don't ask for an overdraft.

blue.peter

Forget your credit score. That's just a meaningless number. What matters is your credit history - things like your repayment record, loans taken out and repaid, any defaults. That's what potential lenders are looking at.

The switch itself won't affect your credit rating. However, applying for the new current account will result in a hard search on your record. This might, or might not, be significant. The significance depends on other factors.

Credit Karma has this to say about hard searches:

Hard searches are made by lenders when considering applications for credit. They don’t affect your TransUnion credit score, but may be considered by lenders when working out how credit-worthy you are.

FWIW, I applied for (and got) a new current account on 27 July. I then applied for (and was given) a credit card on 4 August. Both will have generated hard searches. The second bank will, I assume, have seen the search done by the first, but it didn't (AFAIK) bother them. It's generally reckoned not to be good to have too many hard searches/new applications in a short period - you look desperate for credit. I'm expecting to see my credit score (from Experian and Equifax) dip for a few months, but am not bothered. It doesn't really mean anything. However, I don't intend to put in any credit application in the foreseeable future. In part, that's because two hard searches in less than two weeks might be a bit of an issue. OTOH, the rest of my credit history is pretty good: I have a long record of using credit cards and never having missed a repayment.

yorkiechick

Thank you, I'm happy enough with my current bank (HSBC) in that they've done nothing wrong! But savings interest is very poor compared to the likes of First Direct (my HSBC account is old enough to be able to switch) or the rewards from Santander so I think I'll look into it

grumbler

blue.peter said:

Forget your credit score. That's just a meaningless number. What matters is your credit history - things like your repayment record, loans taken out and repaid, any defaults. That's what potential lenders are looking at.

The switch itself won't affect your credit rating.

It's believed that having a long-standing current account has a positive effect and the OP was rightfully worried that losing it as a result of switching can have a negative effect.

blue.peter

grumbler said:

It's believed that having a long-standing current account has a positive effect and the OP was rightfully worried that losing it as a result of switching can have a negative effect.

Hmm. Maybe. FWIW, though, I've dumped four current accounts and opened three in the last five years. My oldest one is less than three years old. I haven't noticed any adverse effect when I've applied for new accounts or credit cards. I guess that, as with anything else, it's the context of the overall history that matters.

Daliah

A single hard search in the last 6-12 months shouldn't make any difference to your ability to get a mortgage. If you already know who you would like to get the mortgage from, you can discuss it with them, or - to be on the absolute safe side - postpone your current account switch bonus hunt until you have sorted your mortgage. Switch offers do come and go all the time.

As already mentioned, don't switch your main account - get yourself a 'donor' account that gets used just for switching.

Also, don't think you need to keep your savings with the bank you have your current account with. Generally speaking, the worst place for savings are the old high street banks. You get much better interest deals if you shop around a bit.

blue.peter

Daliah said:

...to be on the absolute safe side - postpone your current account switch bonus hunt until you have sorted your mortgage...

But either make your switch before you move house, or expect to have to leave it for a while.

The only time I've ever been turned down for a new account of any type was in 2010. At that time, I had:

• the same current account for 20 years;
• the same Visa credit card for 20 years;
• the same Access/MasterCard for about 30 years;
• no mortgage (paid off a year or so earlier);
• no loans;
• a perfect repayment record on all cards and loans (including a mortgage) for 30 years.

The only reason that I can think of for the rejection was that I'd moved house a few months earlier.