Will switching damage my credit rating?
Q: I'm tempted to move from Barclays to Santander. But I'm worried about my credit score. I recently bought something on store credit and one question on my successful application form was “how long have you been with your bank?” If I change banks, will it damage my credit rating?
A: Justin Modray, founder of candidmoney.com
Switching your bank current account shouldn't generally affect your credit score if your overall rating is good. But some lenders do like to see an applicant who has had the same current account for several years because it suggests financial stability – so it could make a marginal difference.
However, if you move to Santander but keep the Barclays account open with a nominal balance, this will give you the option of using that account on the loan application, which will get around this potential issue.
Moving current accounts is pretty straightforward. You'll just need to transfer your salary and direct debits from the existing current account to the new one; in fact, Santander will do this for you under the Current Account Switch Service. The whole process should complete within seven working days.
Moneywise says: However, if you switch as part of the Current Account Switch Service your old account will close on the day that you choose to switch.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Your credit score is a three-digit number (ranging from a low of 300 to a high of 850) calculated from the information in your credit report. Your credit score enables lenders to determine how much of a credit risk you are. Basically, a low credit score indicates you present a higher risk of defaulting on your debt obligations than someone with a high score. If you have a low credit score, any products you successfully apply for will carry a higher rate of interest commensurate with this risk.