From interest rates on linked savings accounts to cash deposits, incentives for switching have become popular. This week, NatWest became the latest bank to launch a cash bonus for customers – both new and existing – looking to switch current account.
Money saving hacks: Man reveals how he’s boosting savings by £1,080 NatWest is offering £175 to new and current customers
Monzo: How users could automatically save via 1p savings challenge
Getting the extra money in the bank may provide a welcome boost to one’s weekly budget – or even savings.
However, some people may wonder what the financial move could mean when it comes to credit scores.
In addition to being important for being accepted for unsecured credit such as a credit card or loan, a good credit score could be kind to a person’s pocket too – potentially increasing chances of securing the best deals.
Speaking exclusively to Express.co.uk, John Webb, Consumer Affairs Expert at Experian, explained that switching bank account can have an important on a credit score – but only in the short-term.
READ MORE: Martin Lewis reveals discounts worth thousands which 1.3m people could get
Mortgage UK: People applying for mortgages have been issued a warning about bank account switching (Image: GETTY)
“It’s a relatively easy process to switch current accounts now, which could be tempting with the financial rewards and benefits you might be offered,” he said.
“However, when you switch to new accounts, there might be a short-term dip to your credit score.”
So, how long could the bank move affect a credit score for?
According to Mr Webb, it could lower a credit score for around six months.
DON’T MISSMonzo reveals worrying signs bank account holders should watch out for [WARNING]Cold Weather Payment: 5,000 payments made so far this season – are you eligible for £25 [STATISTICS]State pension age ‘acts as artificial hard line’ – government urged to make claim flexible [REPORT]
Martin Lewis reveals pensioners could be missing out on Pension Credit State pension age change warning: Retirement age will increase
As such, the Consumer Affairs Expert warned people who were making applications such as for a mortgage in the near future to be “careful”.
He said: “It’s a good idea to not apply for more than two accounts every three months, and having new accounts showing on your credit report could also lower your score for about six months.
“So be careful if you’ve got any important applications on the horizon like a mortgage.”
Mr Webb added: “Before you apply for a new bank account it’s worth checking your credit report to see where you stand.
“You’ll improve your chances by making sure you’re registered on the electoral roll, and you haven’t applied for too many things in the last three months.”
Mortgage applicants may opt against switching bank account in the run-up to submitting their application (Image: GETTY)
Credit expert on how credit score could affect mortgage options Credit score tips, according to Experian
Know where you stand
“It’s always a good idea to check your credit report and score before you apply for an account.
“You can see where you stand and if there’s anything to improve or correct before you apply for your new account.
“You can check your credit report for free from Experian.”
Space out applications
“It’s good to switch to get rewards, perks or lower rates on overdrafts, but applying for lots of accounts in a short time could lower your score because lenders might think you’re overly reliant on credit.
“As a general rule try not to apply for more than two things every three months. This will keep your score looking as healthy as possible.”
Mortgage: Map shows best places to invest in property in UK according to Howsy (Image: EXPRESS)
Lenders like mature accounts
“When you open a new account it could lower your score for around six months. Lenders like to see mature accounts with a good payment history when you apply for credit.
“So constantly switching accounts every few months could reduce your chances of getting credit at the best rates in the future.
“You can also gain points on your Experian Credit Score for having accounts open for a long time.”
Pick the right time to switch
“Recent applications and brand-new accounts could lower your score for a few months, so make sure you’re switching at the right time.
“If you’ve got important applications coming up, like a mortgage or loan, you might want to avoid switching.
“A lower score could affect the decision and the interest rate, which could cost you money in the long run.”