Can bank switching affect your credit score? UK credit ratings explained

Bank switching can allow you to access cash offers and better interest rates. But can it also be harmful to your credit report? We explain all.

A woman considers bank switching
(Image credit: Getty Images)

With two competitive bank switching bonuses recently announced by high street banks, many people could be lining up a change of provider in the coming weeks.

NatWest recently resurrected its £200 switching offer, while Lloyds Bank is also offering consumers £175 to switch

It comes after the Current Account Switching Service (CASS) reported that it had seen the busiest quarter in its decade-long existence between October and December last year. Almost 434,000 bank switches took place over the last three months of 2023.

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Switching can bring several benefits. CASS reported that the availability of online or mobile banking, the interest on offer, the quality of the customer service, as well as the location of branches were the top reasons why people preferred their new account. 

You may also be able to access add-on accounts with decent rates. Regular savers, such as Co-op Bank’s new offering, often come attached to current accounts.

But, while the benefits of switching are usually quite clear, can there be any pitfalls when it comes to your credit rating? MoneyWeek has looked into the details. 

Can bank switching damage your credit score?

The main issue to be aware of if you’re considering a switch is the impact it will have on your credit score

Experian head of consumer affairs, James Jones, says: “Applying for any type of credit, including current accounts, will usually result in a credit check that leaves a visible mark for other banks and lenders. These ‘hard footprints’ are a factor for credit scores as they indicate your thirst for credit and a recent spate of applications can signal financial stress.

“This is why we strongly encourage people to space out credit applications and to first shop around using eligibility-checking services. These use only soft footprints - which are invisible to lenders - to help you decide where to apply. It’s also wise to avoid applying for any form of credit in the months running up to a mortgage application.”

Jones adds that a single bank switch will only make a “small impression” on your rating, so it’s “unlikely to cause any inconvenience”. Only those with a low credit score are likely to see an impact when changing providers.

The impression made on your credit report will then be seen for six months, after which it will be “disregarded”, Jones says. It will fully disappear after a year. But, according to CASS, if you take up multiple switching offers at the same time, it may take longer for your credit score to return to normal. So, it could make sense to space out your applications.

CASS also says a full switch may be better for your credit score than applying for an additional account to the one you already hold. It says this is because closing your original account can lead to a net positive contribution to your rating.

After a switch takes place, the organisation says your credit score will be protected by your bank or building society if any issues disrupt any standing orders or direct debits that are due to come out of your account. CASS urges consumers to ensure the information they provide in their application to switch exactly matches the details held by their old provider.

Does loyalty pay?

There are many reasons why it can be convenient to remain loyal to your bank or building society. For example, your current provider may have a conveniently-located branch, their service could be exemplary and you may simply trust them with your money.

In some cases, it can really pay to stay. For example, Virgin Money’s market-leading 5.25% one-year cash ISA is only available to existing customers. Your original account may also come with benefits

And your credit score may also benefit from sticking with one or two long-held accounts. Experian told MoneyWeek that it attributes credit score points based on the average age of the accounts a person holds. So, mature accounts will have a positive impact on your report.

Is switching worth it?

So, switching and staying can both impact your credit score in different ways.

While the free cash offered as a switching bonus is certainly attractive, it’s also worth weighing up whether your existing account really delivers for you when it comes to perks (e.g. cashback and exclusive accounts), interest rates and customer service. If another account scores well on all of these metrics and offers a switching bonus too, it’s definitely worth considering.

On top of the pros and cons of the account, you should also think about whether you will need your credit score to be at its best over the next 12 months. For example, if you have a mortgage application coming up, it may be a good idea to hold off until it’s done.

Henry Sandercock

Henry Sandercock has spent more than eight years as a journalist covering a wide variety of beats. Having studied for an MA in journalism at the University of Kent, he started his career in the garden of England as a reporter for local TV channel KMTV. 

Henry then worked at the BBC for three years as a radio producer - mostly on BBC Radio 2 with Jeremy Vine, but also on major BBC Radio 4 programmes like The World at One, PM and Broadcasting House. Switching to print media, he covered fresh foods for respected magazine The Grocer for two years. 

After moving to - a national news site run by the publisher of The Scotsman and Yorkshire Post - Henry began reporting on the cost of living crisis, becoming the title’s money editor in early 2023. He covered everything from the energy crisis to scams, and inflation. You will now find him writing for MoneyWeek. Away from work, Henry lives in Edinburgh with his partner and their whippet Whisper.