Does closing a bank account affect your credit score?

How closing a bank account could impact your credit score

There are lots of reasons why you might want to close your bank account, and the chances of you having the same bank account for your whole life are slim. But did you know closing a bank account could indirectly affect your credit score? We’ll tell you all you need to know about the link between your bank account and your credit profile, as well as what to do before closing your bank account that will leave your credit score unscathed. 

When should you close your bank account?

You could close your bank account for a number of reasons, such as finding a new account elsewhere that better suits your needs, taking advantage of a new customer offer, or simply finding that you no longer need your old account’s services. 

If your old bank account charged you for using it, it makes sense to close it to stop incurring fees. Closing it can also reduce the chances of your account being used fraudulently, or old cards going missing and leaving you at risk of having your details stolen. 

Does your bank account show up on your credit score?

Your bank account, and what goes on within it, isn’t monitored by any credit reference agencies. That’s because your credit score only shows how you repay your debts, such as things like credit cards, overdrafts or mortgages. However, when you close your bank account it could impact what credit agencies see, especially if your bank account was linked to unpaid debt. 

The link between your bank account and your credit report

If you’ve missed a payment to a creditor, such as your mortgage provider or a store card, and this payment should have come out of your closed bank account, that will leave a negative mark on your credit score. 

To put it simply, if you owe £100 to your credit card provider, but close your bank account before paying it, and don’t let your credit card provider know about your new bank details in time for your scheduled payment to come out, they could report this as a missed payment. 

If that ends up going through to a debt collection agency, it will show up on your credit report as a failed payment, and worst of all, this failed payment will remain on your report for up to seven years, even if you go on to make the payment from your new bank account. 

How to close a bank account without damaging your credit score 

When you sign up for a new bank account, your new account provider will often talk you through the process of closing your old account down, especially if you’re planning to use the new bank as your main current account. 

If you use the Current Account Switch Guarantee, they can move regular payments over to your new account quickly and seamlessly, ensuring all your scheduled debt repayments are carried over on time for them to go out. All you’ll need to do is give them your account and debit card numbers, and choose a date for the switch to be completed. Note: It can take up to seven working days for your current account to transfer over.

What if you just want to close your bank account?

If you just want to close your bank account, and don’t want to switch over to a new one, this can be done fairly easily by contacting your bank. If you’re in your overdraft, they’ll ask you to pay off what you owe before they close your account.

However, it’s important to pay attention to any scheduled payments set up to come out of the account, as if you close it without moving them elsewhere, that’s where the problems begin. Ensure you only close your account after all your debt requirements have been met, and if future payments are pending, you’ll need to provide your lenders with your new account details. 

How to improve your credit score after it’s been impacted by a bank account closure

If your credit score is affected by closing your bank account, this will stay on your credit report for up to seven years. But there are ways you can improve your credit score during this time, that could show lenders that you’re reliable in other areas of your finances: 

• Add yourself to the electoral roll
  This shows lenders that you live at a fixed address, even if that’s shared housing or your parents’ home.

• Take out a credit card and set up regular repayments
  A credit card is an easy way to build up a good credit rating, so long as you make your required monthly payments and don’t routinely max out your credit limit. 

• Stick to your credit limits
  Don’t exceed the limits on any kind of borrowing, such as credit cards, loans or overdrafts.

• Avoid late payments
  Making payments on time, every time, will show lenders that you can be trusted with their money. 

• Keep old accounts open to show a longer credit history
  While you might want to close old bank accounts, keeping old credit accounts open will paint a better picture of your borrowing history. 

How Boshhh Mobile can improve your credit score

When you take out one of our credit building SIMs, your credit score will improve over time with every monthly and on-time payment. It’s as easy as that. We have SIM deals for every kind of phone user, so just find the right one for you and start seeing your credit score go up in no time.