Credit Score Basics > Does an application for a new current account affect credit score?

Does an application for a new current account affect credit score?

Wollit Team2 minute read · Updated 29th June 2024

Opening a new current account in the UK can affect your credit score, but the impact is usually temporary and limited.

It all depends on what kind of current account you’re applying for.

How can a current account affect my credit score?

If you apply for a regular bank account, you might sometimes be asked to go through a full credit check. This is always the case if the current account comes with an overdraft facility, which is a kind of borrowing. The credit check helps the bank figure out how much it can lend you based on your credit history.

Unfortunately, a full credit check (also called a “hard credit check”) stays on your credit file for two years and it can temporarily lower your credit score.

However, if you apply for a basic bank account, most of the time you won’t be asked to go through a credit check. This is because a basic bank account usually does not offer an overdraft facility, which makes them less risky for the bank.

This means there’s no need for a full credit check, and the bank might only run a “soft” credit check that only verifies your identity. This soft check is not visible on your credit report and doesn’t impact your credit score at all.

What are some other ways that a current account can affect my credit score?

Besides the initial credit check, a bank account can affect your credit score in two more ways:

If you apply for many accounts in a short amount of time, it will lower your credit score. This is because multiple hard credit checks in a short period are seen as a warning sign by lenders.
Having a joint bank account can also impact your credit score, especially if the other account holder has a poor credit history. This is because lenders will look at the credit history of all account holders when evaluating your creditworthiness – you’ll be “financially linked”.

However, you should remember that the impact of a hard credit check is temporary and your credit score will get back to normal after a few months.

And if you become financially linked with someone with bad credit, you can send a “Notice of Disassociation” to the credit reference agencies. If this is your partner, you don’t need to be divorced to do it – all you have to do is close the joint account.

How is a basic bank account different from a regular current account?

Basic bank accounts are meant for individuals with poor or no credit history. They provide essential banking services like depositing money, paying bills, and using online banking, but without the risk of an overdraft facility.

If you have no credit history or bad credit, a basic bank account can actually have quite a few pros over a regular bank account:

Basic bank accounts do not require a credit check, making them accessible to individuals with poor credit history. This is particularly beneficial for those who have experienced financial difficulties in the past and are trying to rebuild their credit ratings
Basic bank accounts do not provide overdraft facilities, which means you cannot borrow money from the bank. This can help prevent debt and financial difficulties by ensuring you only spend what you have
Basic bank accounts are often free to use, with no monthly fees or charges. This can be a significant cost savings compared to standard current accounts, which may have monthly fees or charges for services like overdrafts or credit cards

You should also remember that a basic bank account doesn’t affect your credit score in any way. Neither does the amount of money you have in it.

What does affect your credit score is your credit history. Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies. This helps you build your credit history and directly influences your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report that shows lenders that you’re reliable and pay your bills on time.