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Switching benefits Vs Credit Rating/Mortgage Impact

ANoseyParker
Posts: 2 Newbie

Hi, first time forumite though I've enjoyed using the wealth of knowledge from MSE articles and other threads. I have a decision to make, and it involves several topics so I would appreciate others' wisdom.
The question is whether I should go ahead with a current account switch.
A key factor in this is I am aiming to be a first time buyer in the near future with my partner, possibly as soon as later this year. I have a comfortable deposit though we are blocked until November for a LISA to mature.
The switch in question is (from Virgin Money) to a Club Lloyds Account. It of course has the usual switch cash and some other nice benefits, one of which is the exclusive mortgage options.
My VM current account gets enough from my salary to waive the monthly fee, and it technically has 3 active DDs on it as required (more on these points later).
My concern is, I've had this account for many years (opened as a teenager with Yorkshire Bank, then stayed with when they became Virgin Money), and I understand long and stable financial relationships contribute to my credit score. So, on balance, would closing and switching that account so close to applying for a mortgage do more harm than good?
Coming back to the 3 DDs, one is a monthly CC payment, but two haven't had any activity since 2023, though according to my internet banking they are still "active". One is the DVLA for up front road tax, and the other is an old mobile network I'm not even with anymore. Despite this, since it says "active", I assume this are still valid for the switch incentive terms?
As a side note, I'm sure someone will point out I could have my cake and eat it by using a "dummy" account to switch from, and having SOs move money into and out of the Lloyds Club account to qualify for the switch, avoid the monthly fee, and get the (mortgage etc.) benefits from having the account. I did in fact open a "dummy" account with TSB a few weeks ago, but haven't done anything with it and am not particularly confident with this approach, especially given the micromanaging/stress involved to make sure requirements are met whilst also avoiding headaches or charges from not having money in the right account at the right time.
Sorry if this a long one, but I look forward to your replies and thank you for your time.
The question is whether I should go ahead with a current account switch.
A key factor in this is I am aiming to be a first time buyer in the near future with my partner, possibly as soon as later this year. I have a comfortable deposit though we are blocked until November for a LISA to mature.
The switch in question is (from Virgin Money) to a Club Lloyds Account. It of course has the usual switch cash and some other nice benefits, one of which is the exclusive mortgage options.
My VM current account gets enough from my salary to waive the monthly fee, and it technically has 3 active DDs on it as required (more on these points later).
My concern is, I've had this account for many years (opened as a teenager with Yorkshire Bank, then stayed with when they became Virgin Money), and I understand long and stable financial relationships contribute to my credit score. So, on balance, would closing and switching that account so close to applying for a mortgage do more harm than good?
Coming back to the 3 DDs, one is a monthly CC payment, but two haven't had any activity since 2023, though according to my internet banking they are still "active". One is the DVLA for up front road tax, and the other is an old mobile network I'm not even with anymore. Despite this, since it says "active", I assume this are still valid for the switch incentive terms?
As a side note, I'm sure someone will point out I could have my cake and eat it by using a "dummy" account to switch from, and having SOs move money into and out of the Lloyds Club account to qualify for the switch, avoid the monthly fee, and get the (mortgage etc.) benefits from having the account. I did in fact open a "dummy" account with TSB a few weeks ago, but haven't done anything with it and am not particularly confident with this approach, especially given the micromanaging/stress involved to make sure requirements are met whilst also avoiding headaches or charges from not having money in the right account at the right time.
Sorry if this a long one, but I look forward to your replies and thank you for your time.
0
Comments
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You are right that it is best to avoid new credit applications roughly 6 months before a mortgage application. However, I opened a Club Lloyds account on the same day I applied for a mortgage, precisely to get the lower interest rate on the mortgage.
If it was me, I would switch the TSB account. You can create £1 a month direct debits with charities (UNICEF being one) and cancel them once you have the switch bonus.
With Club Lloyds, you only need to set up two standing orders. One to send £2000 to the account and another to send it back the next day. Not that difficult or stressful.1 -
Switching by itself will have minimal impact on your credit file by virtue of closing old accounts. Some lenders like stability and long account lifetimes can help indicate that. The ultimate impact of this is fairly small in the scheme of things though, compared to other factors. So don't let it stop you.
The bigger issue really is making new credit applications in the period leading up to your mortgage application. Hard credit applications, such as those for opening new current accounts, in the 6-12 months have been known to scupper applications, by reducing the amount you are able to borrow, increasing the interest rate, or just getting flat out declined. Ideally you want to leave any sort of financial rearranging until after the mortgage has gone through.1 -
Appreciate the thoughts both.
Did some rummaging in my credit score, it's on the fair-good border, though my affordability is excellent. Main issue in both is a lack of debt - I have a credit card but spend less than 10% of the limit, so I guess I need to put more on it.
In terms of hard credit checks, I have 1 from May (opening that TSB dummy account) and 1 from summer last year, so I'm thinking an application for Lloyds shouldn't be too bad, and there's at least 5 months until I would apply for a mortgage.
@jbrassy was there any link between the club account and the mortgage beyond letting you access the deal? Or was it as simple as merely having one "unlocked" the mortgage rates? I'm tempted to take your advice and switch an unused account0
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