Will switching banks hurt my credit score?

Will💡 Definition:A will is a legal document that specifies how your assets should be distributed after your death, ensuring your wishes are honored. Switching Banks Hurt My 💡 Definition:A credit rating assesses your creditworthiness, impacting loan terms and interest rates.Credit Score💡 Definition:A credit score predicts your creditworthiness, influencing loan rates and approval chances.?

Switching banks can feel like a daunting task, especially if you’re worried about how it might affect your credit score. The good news is that switching banks, in itself, does not directly impact your credit score because bank accounts are not used in credit scoring. However, there are some indirect ways this transition could affect your financial health. In this article, we’ll explore how switching banks might indirectly impact your credit score and provide you with a structured approach to ensure a smooth transition.

How Bank Account Changes Affect Your Credit

Direct vs. Indirect Impact

When it comes to credit scores, only credit-related accounts like credit cards, loans, and mortgages are considered. Closing or opening a checking or savings💡 Definition:Frugality is the practice of mindful spending to save money and achieve financial goals. account will not appear on your credit report and thus won’t directly impact your score (Experian, 2025; FICO💡 Definition:A three-digit credit score (300-850) calculated by Fair Isaac Corporation, used by lenders to assess creditworthiness., 2023).

However, there are indirect ways by which switching banks might affect your credit score:

• Hard Credit Inquiries: Some banks perform a hard credit inquiry when you open a new account, especially if you're applying for overdraft protection💡 Definition:Withdrawal exceeding available account balance or a credit product. This can temporarily lower your score by 5–10 points (Unbiased, 2024; Chase, 2025). Fortunately, many banks, especially in the UK, use soft credit checks for current accounts, which do not impact your score.

Steps to Minimize Risks When Switching Banks

To ensure a smooth transition and avoid any negative consequences, consider the following structured approach:

1. Open the New Account First: Before closing your old account, set up the new one. This ensures you have a working account to manage your finances during the transition.

2. Update Direct Deposits and Automatic Payments: Ensure all your income💡 Definition:Income is the money you earn, essential for budgeting and financial planning. sources and automatic payments are directed to the new account. This includes your salary, utility bills, subscriptions, and any other recurring transactions.

3. Allow for a Full Billing Cycle: Give it at least one full billing cycle to ensure all pending transactions and payments have cleared. This reduces the chance of missed payments, which can severely damage your credit score.

4. Close the Old Account: Only after confirming that all transactions have been processed and the account balance is zero should you close the old account. Ensure there are no outstanding fees or overdrafts.

Real-World Scenarios

Scenario 1: Missed Payments

Imagine you switch banks but forget to update your rent autopay. If the payment bounces, it could result in a late payment being reported to credit bureaus, potentially lowering your score by 50–100 points. Such a mark can remain on your credit report for up to seven years (Fizz, 2024).

Scenario 2: Hard Inquiry Impact

If you apply for a new credit card at your new bank during the switch, you might experience a small, temporary dip in your score due to the hard inquiry. However, this is generally not a long-term issue if no other credit applications are made soon after (Chase, 2025).

Common Mistakes to Avoid

• Not Updating Payments: Failing to update your direct deposits and automatic payments can result in missed or late payments.
• Applying for New Credit: Applying for new credit products during the switch can lead to multiple hard inquiries, affecting your credit score.
• Closing Accounts Prematurely: Ensure your old account is fully settled with no pending transactions before closing it.
• Ignoring Overdrafts: Any overdrafts or unpaid fees on a closed account can lead to collections, which will harm your credit score (Experian, 2025).

Bottom Line

Switching banks doesn’t have to harm your credit score if managed correctly. By carefully planning your transition and ensuring all financial obligations are met, you can enjoy the benefits of a new bank without any negative impact on your credit. Remember, the key is to update all automatic transactions and avoid unnecessary credit applications during the switch. With these steps, you can make the change with confidence and maintain your financial health.