How current accounts affect your credit file

A current account affects your credit file in two ways: when you apply for one, and how you use any overdraft on it. When you open an account, the bank will usually run a credit check to see your credit history, including whether you have had problems paying money back¹. If the account includes an overdraft, that check is normally a hard search, which leaves a footprint on your file visible to other lenders for at least 12 months². An account with no overdraft, such as a basic bank account or most credit union accounts, usually involves no credit check at all³.

The good news is that the everyday things people worry about most do very little damage. Simply holding a current account does not lower your score. Switching accounts through the Current Account Switch Service leaves no mark of its own⁴. And getting debt advice never affects your file⁵. What does register is a run of applications in a short space of time, an overdraft that is permanently maxed out or regularly exceeded, and missed payments that lead to a default.

Opening a current account: soft or hard credit search

When a bank opens a current account for you, it will usually run a credit check first. MoneyHelper, the government-backed money guidance service, is clear about why: the bank wants to see your credit history, including whether you have had problems paying money back in the past¹. Banks can refuse an application based on credit history, so the check is a real gate, not a formality¹⁰.

Whether that check is "hard" or "soft" matters, because the two behave very differently on your file:

The key distinction is the overdraft. An overdraft is a type of credit linked to a bank account¹⁰, so an account that offers one is a credit product, and applying for it generally means a hard search. Which? notes this directly for student accounts: because student bank accounts include an overdraft, any application involves a hard credit check which will appear on your credit file¹¹. The same logic applies to standard adult accounts with overdrafts.

Accounts without an overdraft sit at the other end. Basic bank accounts, which exist for people who would not pass a standard credit check, are designed so that your credit history should not affect your application¹². Credit union current accounts usually come with no credit check either, and that holds even if you apply for an overdraft, because credit unions normally use manual checks to decide whether to lend³. Some credit unions offer current accounts with no credit check or overdraft at all¹³.

The FCA's consumer research on credit found that some level of understanding of the difference between hard and soft checks exists among consumers, and is more common among people who are financially struggling, partly because "check your eligibility before applying" tools have made soft searches more familiar¹⁴. Those eligibility checkers are worth knowing about: they run a soft search, so you can gauge your chances before committing to a formal application that leaves a footprint.

If you are unsure which type of check a particular bank will run, the dedicated guide to bank accounts with no credit check lists the options, and how to open a current account covers the application process and what to do if a bank refuses you.

Several applications in a short space of time can lower your score

One hard search is a small event. A cluster of them in a short period is not. Which? states that multiple hard searches, particularly within a short period, can lower your credit score². StepChange puts the same point more bluntly: a lot of checks in a short amount of time can reduce your score¹⁵.

The reason is how lenders read the pattern. Citizens Advice explains that if you apply to lots of lenders, this leaves a trail on your credit reference file, and it may affect your score because lenders may conclude you already have lots of borrowing, or that you have been refused by other creditors¹⁶. Which? adds that every credit application is recorded on your credit history, and unsuccessful applications can bring down your score¹⁷.

This applies to current accounts specifically where the account has an overdraft. Which? notes that current accounts with overdrafts appear on your credit report, and successive applications in a short space of time could negatively affect your score¹⁸. Applications for plain accounts with no credit facility do not create the same trail.

The effect is not permanent, and it is not a reason to avoid applying at all. But it does change how to go about it:

• Check your eligibility first, where a bank offers a soft-search checker, so you only make a formal application you are likely to pass¹⁴
• Avoid applying for several overdraft accounts in the same few weeks, for example chasing switching offers at several banks at once
• Space applications out if you can, so the searches do not bunch together on your file
• Remember that refused applications are recorded too, which is why checking eligibility first matters¹⁷

Business Debtline makes the practical consequence clear: a lot of checks in a short amount of time can reduce your score¹⁹. That matters most in the run-up to a big application such as a mortgage, where a cluster of recent searches invites questions. The guide to credit scores and credit reports covers how lenders read your file more broadly.

Overdrafts are what put a current account on your credit file

The overdraft is the part of a current account that behaves like credit, because it is one. MoneyHelper describes an overdraft as a type of loan that often has interest⁷, and StepChange calls it a type of credit linked to a bank account¹⁰. If you spend more than you have in your account, including when there is not enough to cover a Direct Debit or standing order, there are usually fees or interest¹³.

That is why overdraft use is what lenders actually see. StepChange sets out the two patterns that can affect your credit rating: going over your overdraft limit often, and owing too much on your overdraft²⁰. Both are visible on your file, and both read to a lender as signs of strain.

Interest makes the position worse over time. The Bank of England notes that certain types of borrowing, such as overdrafts, charge higher interest²¹. In Northern Ireland, guidance on basic bank accounts notes that if you overdraw from your account, the bank will charge interest on a daily basis and can ask that the overdraft is cleared on demand²².

The regulator also treats repeat overdraft use as a warning sign in its own right. FCA rules in force since December 2019 list the features of repeat overdraft use that may signal actual or potential financial difficulty, including an upward trend in use over time, changes to regular credits or debits, use of other products indicating a fall in disposable income, use of an unarranged overdraft, refused payments, and customer information indicating difficulties²³. Those rules require firms to communicate with customers showing this pattern, which is covered in detail in overdraft repeat use: the FCA rules.

If overdraft debt has become a problem, the pages on overdrafts, how overdraft interest and charges work and struggling to repay an overdraft set out the options, and free debt advice is available from charities such as StepChange and National Debtline without any effect on your credit file⁵.

Switching accounts: usually no effect unless you switch often

Switching your current account is relatively easy using the Current Account Switch Service⁴, and the switch itself is not what touches your credit file. What touches it is the application for the new account, because that is when the bank runs its credit check¹. The switching of Direct Debits, standing orders and your balance leaves no separate record.

The one thing that can block a switch is an overdraft. MoneyHelper explains that if your new overdraft covers what you owe, the funds will be sent to your old bank and you will owe the overdraft balance on the new account instead. If the new overdraft is a lower amount, or you cannot get one, you will need to arrange to pay off the remainder separately before you can switch or close your old account¹. The narrow guide to switching while overdrawn covers this situation step by step.

Regular switching deserves a little care. Which? reports that switching student bank accounts could cause a temporary dip in your credit score, though your score may recover over time if you manage your finances responsibly¹¹. The mechanism is the same as for any applications: each switch means a new account application, and each application with an overdraft means a hard search. Someone who switches every few months to collect switching offers builds a trail of searches that lenders can read as instability. The guide to how bank switching offers work explains the offers themselves.

For most people switching once every few years, the effect is negligible. The mechanics of the switch, including the seven-day service and what happens to payments sent to the old account, are covered in the Current Account Switch Service.

How long a credit search stays on your file: 1 or 2 years

Hard searches do not sit on your file forever. Which? states that hard checks leave a footprint on your credit file visible to other lenders for at least 12 months, and can affect your credit report and score during that time². National Debtline adds that searches for applying for credit stay on your file for different lengths of time depending on which credit reference agency was used²⁴. In other words, the exact retention period varies between agencies, so the same application may show for longer on one agency's copy of your file than another's.

Two things are worth separating here, because they are often confused:

• Searches are the record of a lender looking at your file. They are short-lived, generally at least 12 months and varying by agency².
• Account history and adverse information last much longer. Your credit file shows information about your credit use over the past six years²⁵. Missed payments, defaults and court judgments generally stay on your file for six years⁸, and accounts appear on your credit file for six years from when they default²⁵.

The Information Commissioner's Office, which oversees how credit reference agencies handle your data, states that searches on your credit file should not have a negative impact on your credit history²⁶. In practice, that means the mere existence of a search is not the problem: it is the pattern of several searches close together, and what a lender infers from it, that does the damage.

You can see every search on your file, including who made it and when, by checking your credit report. Which? has a guide to checking your credit score for free with each agency². If a search appears that you do not recognise, query it with the credit reference agency, because an unauthorised search can be corrected.

Closing a current account: when it can affect your score

Closing an ordinary current account, on its own, does not damage your credit score. There is no rule that rewards or punishes you for the number of accounts you hold: provided you meet the eligibility criteria, there is no limit to the number of accounts you can open⁹, and by the same token no penalty for closing one you no longer use.

There are, however, three situations where closing an account interacts with your credit file.

The first is an overdraft. You cannot close an account that is overdrawn: the overdraft is money you owe, and it must be cleared before the account can be closed¹. If the account has already defaulted, the position is different again. StepChange notes that your credit file will show that you did not make your agreed payments, which impacts your credit score²⁷, and accounts appear on your credit file for six years from when they default²⁵. Closing the account does not remove that history; it simply stops the account being active.

The second is a joint account. Closing a joint account will not remove the link to the other person from your credit file²⁸. That link matters: opening a joint account creates a financial association, and lenders can look at the other person's credit history when you apply for credit, even if you apply in your own name only²⁹. If you have no other financial connection with that person, for example after a separation, you can ask the credit reference agencies for a notice of disassociation to break the link²⁸. The guides to joint bank accounts and freezing a joint account after a separation cover this in more detail.

The third is timing around a big application. Because closed accounts with a clean history can still be seen for six years, closing an old account does not erase good conduct either. There is nothing in the rules that says an open, well-run old account helps and a closed one hurts; what lenders see is the history either way²⁵.

The practical steps for closing an account properly, including moving Direct Debits first and getting confirmation, are in how to close a bank account.

Keeping the effect on your credit file small

Most of what protects your credit file around current accounts comes down to a handful of habits, each backed by the guidance above.

1. Check eligibility before applying. Soft searches leave no trace on your credit history⁶, so an eligibility checker costs nothing on your file, while a failed hard application is recorded and can bring down your score¹⁷.
2. Space out applications. A lot of checks in a short amount of time can reduce your score¹⁵, so avoid bunching overdraft account applications together, particularly before a mortgage application.
3. Keep overdraft use modest. Your credit rating can be affected if you often go over your overdraft limit or owe too much on it²⁰. Staying well inside the limit, and not using an unarranged overdraft, keeps the account's history clean.
4. Do not miss agreed payments. Missed payments, defaults and court judgments stay on your file for six years⁸. A default notice itself does not affect your credit file, but the account defaulting does²⁷.
5. Get advice early if money is tight. Debt advice does not impact your credit file or credit score⁵, and contacting your lender about your options while you are still up to date with payments has no impact on your credit file either³⁰. Waiting until payments are missed is what causes the damage.

Where things have already gone wrong, the position is not hopeless, but it is long-lived. Getting a debt written off has a negative impact on your credit reference file and may affect your ability to obtain credit for up to six years³¹. Debt solutions such as debt management plans record lower or partial payments on your file³², and some accounts default while you are on such a plan, which is also recorded³³. Insolvency is recorded on your credit file and can affect access to credit in future³². In every case the record lasts around six years, after which it drops off.

If you need help, it is free and it does not touch your file. StepChange states that getting debt advice will not affect your credit file or impact your credit score⁵, and you can start, pause and re-start advice at any time with no impact on your file³⁴. MoneyHelper offers free guidance on banking and debt, and the debt section of this site sets out the full range of options, from informal arrangements to formal solutions, with what each one does to your credit file.