Does closing a bank account affect your financial standings?

How Closing a Bank Account Could Impact Your Financial Standing

There are lots of reasons why you might want to close your bank account, and the chances of keeping the same one for your entire life are slim. But did you know that closing a bank account could indirectly affect your overall financial profile? We’ll explain the link between your bank account and your wider financial picture, as well as what to do before closing an account to keep your finances healthy.

When Should You Close Your Bank Account?

You might choose to close your account for several reasons — perhaps you’ve found a new one that better suits your needs, want to take advantage of a new customer offer, or simply no longer require your old bank’s services.

If your old account charged you monthly fees, closing it can save you money and prevent unnecessary charges. It can also reduce the risk of fraud, such as lost cards being used without your knowledge.

Does Your Bank Account Affect Your Financial Record?

Your day-to-day banking activity isn’t tracked by financial reporting agencies. That’s because these agencies generally monitor how you manage borrowing — such as loans, overdrafts, or mortgages — rather than how you use your bank account.

However, closing an account can have knock-on effects if that account was linked to any unpaid bills or scheduled payments.

The Link Between Your Bank Account and Your Financial Record

If you’ve missed a payment — for example, to a loan provider or store account — and that payment was due to come out of a closed bank account, it could leave a negative mark on your financial record.

Put simply, if you owe £100 to a lender, close your account before paying it, and don’t update them with your new bank details in time, the payment could fail. If that missed payment is passed to a collection agency, it could remain visible on your financial record for up to seven years, even if you later make the payment.

How to Close a Bank Account Safely

When opening a new account, your new provider will often guide you through the process of closing your old one — especially if you plan to make the new account your main current account.

If you use the Current Account Switch Guarantee, your regular payments can be moved over quickly and securely, ensuring your scheduled payments continue without interruption. You’ll just need to provide your account and card details and choose a completion date for the switch. It usually takes up to seven working days.

What If You Just Want to Close Your Account?

If you’re not switching to a new bank and simply want to close an account, contact your bank directly. If you’re overdrawn, you’ll need to clear any outstanding balance before closure.

Make sure to check for any regular payments set up to leave the account. Closing it without redirecting those payments could lead to missed bills or late charges. Only close your account once all obligations have been met, and ensure any lenders or service providers have your updated payment details.

How to Strengthen Your Financial Profile After a Setback

If your financial record has been negatively affected by an account closure, don’t worry — there are steps you can take to rebuild a strong financial reputation:

• Join the electoral roll: This helps confirm your address and stability.

• Use borrowing responsibly: Taking out a small loan or service plan and making regular, on-time payments can demonstrate reliability.

• Stay within limits: Avoid exceeding any agreed borrowing amounts or overdraft limits.

• Pay on time: Consistent, timely payments show that you can manage commitments responsibly.

• Keep older accounts active: Maintaining long-term accounts helps demonstrate stability over time.