To Switch (Current Account) or Not to Switch

Mattrey wrote: »

The current account is still relatively young, 15 months old. But it does have a small £500 overdraft, which I do not utilise.

What you say about the graduate account makes complete sense, so thank you.

And yes, I completely agree about my partner's credit history. She is currently working to build this with a credit card, but with a small 0% overdraft (£660). Would she be wise to request this overdraft be increased whenever possible?

Would you have any other suggestions with regards to the most effective way for her to build her file over 12 months? Would she be wise to switch her 1 year old current account as well?

First of all, having only one bank account is always a bad idea. Everyone should have at least two (in two different banks). If you also have a credit card, keep that card for as long as you can. Ideally "forever". This is to make sure you keep at least one of your credit accounts open for several years. If you close your current account, you still have your credit card account active on your credit file.



Remember, if you close your account which has an overdraft, your credit utilisation ratio will decrease. For example you have £500 overdraft and £1000 credit limit on your credit card. Total amount of credit available to you is £1500. If you make purchases worth £700 each month, then your credit utilisation ratio is about 46% which is below 50% and that's still considered good, or at least not bad. Now if you close your current account with the overdraft, you will only have £1000 credit limit available to you and if you continue spending £700 each month, your credit utilisation ratio will now be 70%, which is too much and it may seem to lenders like you are maxing out your credit card.
You can, of course, apply for an overdraft on your new bank account but that means a hard search on your file. However, one hard search shouldn't be a problem at all. I had 6 searches in 3 months and my credit score plummeted by over 200 points (Experian). :rotfl:But this was just a short term change. Now it's climbing up relatively quickly. A month ago, Nationwide increased credit limit on my credit card and my credit score skyrocketed from 305 to 439 with Equifax. That's much more than I've ever had before. Funny thing is that my TransUnion (Noddle) doesn't change, no matter what I do. It only changes like 5-10 points up or down, but no significant changes in several months, while Experian changed down and up like crazy.



Also, consider LOQBOX for your girlfriend. I signed up in November and it looks good so far. Perhaps that's another factor in my credit score increase. While my credit cards only show in "Short term debt" section, Loqbox shows up in my "Long term debt" because credit bureaux see it as a loan.

If you don't know Loqbox, just google "Loqbox MSE forum" and read threads.


Btw, I recommend you and your partner to open more current accounts, so in the future you can take advantage of more than one switch offer at a time. And keep your credit cards active for years. Even if you buy something just for 10 quids each month, it's ok. Just never miss any payment, that would be a bit contraproductive.