Credit Score Basics > Does opening a bank account affect credit score?

Does opening a bank account affect credit score?

Wollit Team2 minute read · Updated 18th September 2024

Yes, opening a new bank account can affect your credit score in the UK. However, this depends on a few factors, like the kind of account and whether the bank runs a hard or soft check on your file. Here is how it works.

What affects my credit score?

Your credit score is a number that is supposed to show how trustworthy you are when borrowing money. Your credit score is important because it affects your ability to borrow money. A higher score means you are more likely to get loans or credit cards with better interest rates. If your score is low, you might face higher rates or even be denied credit altogether.

It is based on several things, like whether you pay your bills on time, how much of your available credit you are using, how long you have had credit accounts, and the different kinds of credit accounts you have, like loans or credit cards.

How does opening a new bank account affect my credit score?

You might not know this, but your credit score is influenced by how often you apply for new credit as well.

This is because every time you apply for credit, the lender runs a hard check on your file. This hard check is visible to other lenders, and it can give the impression that you’re struggling and looking for credit to “bridge the gap”. Every time you go through a hard check, your credit score will drop a bit because of this. However, this drop is small and temporary.

When you open a bank account, the bank may check your credit to verify who you are and assess risk. There are two types of checks:

Soft check, which simply looks at your credit report but does not affect your score. It’s often used for basic accounts without overdrafts.
Hard check: this type leaves a mark on your credit report and can lower your score temporarily. It’s usually done when you apply for an overdraft or other credit options.

This means that when you apply for a current account that comes with an overdraft, then the bank has to make sure you’re a good borrower in case you want to use the overdraft line. Hence the hard check.

This also means that, while opening a current account with overdrafts may cause a small temporary drop in your score due to the hard check, opening a basic account without overdraft won’t have the same effect.

Does opening any kind of bank account affect my credit score?

Opening a new bank account can affect your credit score, but it really depends on the type of account:

If you open a current account with an overdraft option, the bank will likely do a hard credit check. This could cause a small drop in your score.
If you open just a basic account, these only require a soft check. This doesn’t impact your score.
Finally, opening a savings account typically involves only a soft check, which does not affect your score either.

Can opening multiple accounts hurt my score?

Yes, applying for several bank accounts in a short time can hurt your score. Each hard check lowers your score slightly, and too many checks can make lenders think you are struggling with money right now.

How long will my credit score drop for?

If your score drops after opening an account, it usually goes back up quickly if you manage your money well. Paying bills on time and keeping balances low will help improve your score over time.

This shouldn’t keep you away from opening an account if you need it. At the end of the day, what lenders care most about 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 that reports your monthly subscription as loan repayment, helping you build a history of timely repayments without the risk of getting hit with high-interest charges or going over your card limit. It can even report your monthly rent payment to Experian, adding another line in your credit report that shows lenders you're responsible and pay your bills on time.