Although it's important to limit the number of hard credit checks you have, the credit score impact for most people switching bank accounts will be negligible and short lived. However, there are some situations where you might want to reconsider whether now is the best time to switch accounts.
Your employment status isn't a factor in your credit score and won't impact your credit in any way.
Does switching banks affect your credit score? The short answer is no. According to My Fico, only information about your credit accounts will influence your credit score.
Switching to a new financial institution usually doesn't affect your credit score. However, you should make sure your old account has a positive balance before switching, and make sure you have all your electronic bill pay information transferred to your new account.
Downsides include the fact that finding a new bank and switching accounts can take time. If you've recently moved to a new city, moved across town or simply want (or need) products and services not offered by your current bank, it may be time to swap out the old for the new.
Generally, you won't hurt your score by switching banks, so you can switch them as you need.
As the borrower, you have the right to switch mortgage lenders at any time before you sign the loan contract. Still, it's best to do your due diligence before you begin the closing process.
Payment history has the biggest impact on your credit score, making up 35% of your FICO® score. Amounts owed, which includes your credit utilization ratio, comes in at a close second, accounting for 30% of your score. The higher your credit score, the more likely you are to qualify for certain types of credit.
A balance transfer can improve your credit over time as you work toward paying off your debt. But it can hurt your credit if you open several new cards, transfer your balance multiple times or add to your debt.
Checking your own credit score is considered a soft inquiry and won't affect your credit scores. There are other types of soft inquiries that also don't affect your credit scores, and several types of hard inquiries that might.
Making a late payment
Your payment history on loan and credit accounts can play a prominent role in calculating credit scores. Even one late payment on a credit card account or loan can result in a credit score decrease, depending on the scoring model used.
In most cases, you cannot be fired solely because of bad credit or a low credit score. However, employers in certain industries like financial services can legally fire employees if their poor financial health is seen as a risk.
If you plan to take out a loan or mortgage within the next 12 months, you should avoid frequent switching. Switching banks often can be even more of a problem if you intend to bring overdraft debt with you, as this will be flagged up on your credit report.
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
FICO Score 8 is a base credit score that credit providers use to help figure out a potential borrower's credit risk. Your payment history, credit utilization, length of credit history, new credit inquiries, and the types of accounts you have (your credit mix), are all factors that come into play within FICO Score 8.
A New Lender Means A New Credit Check
Lenders often use a hard inquiry to check your credit, which may lower your credit score temporarily. Switching to another lender will mean another hard inquiry, which might lower your credit score and increase the new mortgage cost.
Your lender is required to send you a Closing Disclosure that you must receive at least three business days before your closing. It's important that you carefully review the Closing Disclosure to make sure that the terms of your loan are what you are expecting.
How long should I wait before applying for another loan? Again, this can depend on your bank or lender's policies. Some lenders require you to wait 3 – 12 months (or make 3 – 12 monthly payments) before you can apply for another loan.
If possible, you should avoid or minimise these to keep your score as high as possible: Frequently setting up new accounts. Opening a new bank account should only lower your credit score temporarily – but if you do it too often, your score won't have time to recover.
If you've outgrown your current credit card, you could ask your card issuer to upgrade it or apply for a new one. Upgrading your credit card generally won't hurt your credit, while a new application can cause a slight, temporary decrease in your score.
If you have any outstanding debts or missed payments, these could affect your credit score regardless of whether you switch banks or not. When you apply for a new bank account, the bank may perform a credit check as part of the application process.