I have a question re account age and credit score…
A bit of my current account history. Over the last few years I’ve been taste testing banks and deciding what my new banking set up will be. As a student I just had my NatWest one (oldest account and one I will keep probably for another 20 odd years) I had a Lloyds (which become TSB, now closed due to TSB not having a branch anywhere near me). Since then I’ve opened a Virgin Money M Plus, at the time they had the best saving rates, Nationwide (switch offer, stupidly burned my Monzo account to get the offer), First Direct (Switch offer, but now Day-to-day bank). Chase for the excitement of something new (not a fan and holding out hope that NatWest or Nationwide have a switch I can switch this to) Same is true of Starling, its a good account and app, which I may retain as being able to pay cash in at the post office is useful.
Other than the NatWest and TSB ones the rest are all about 1-2 years old. Closing the TSB account which I think was about 11-12 years old seems to have had a fairly big negative impact on my account. The “thing to improve” with all the credit agencies seem to be the average age of my accounts.
So eventually getting to my question… If I was to close some of the newer accounts that I am less bothered about e.g Starling, Chase, possibly Virgin (although they’ve put a lot of effort into the app in terms of features and stability so curious to see where they go). Should this have a positive impact on my Credit score? Or if I leave them open and time passes my score will increase by itself due to a stable credit file? I’m only thinking about this as within the next couple of years I want to look at purchasing a home with some stability hopefully in my career by then (I’m a rare genetic disease researcher in academia…)
Sorry for the long rambling post, all advice greatly appreciated!
Your account churn is tiny and trivial compared to mine. And despite thing to improve, any products I apply for, I get them.
It seems to me it is a minor thing.
Stuff that matters on mortgage affordability is like average outstanding unsecured debt (credit cards, BNPL, loans, etc), monthly debt service requirements (I pay down X amount of money to all credit cards a month). As that counts as committed spending.
Do what you want. If you want to close dormant account, do that. If you want to keep them open, keep them.
For me it worked out great to keep dormant accounts. Recently unexpected players offered great savings accounts, which I was able to instantly use, as I already had online banking with them.
Account stability is, by all accounts (pun not intended), a very minor factor for your credit score. Yes, there is an element that lenders like to see stability, but my average account age has always been below 2 years. Yes, I churn accounts so much. I never usually keep an account for too long and have no loyalty to any bank. Still, it hasn’t caused any issues for me.
On whether to keep unused accounts open or closed – closed accounts still count towards average account age, but they’ll be frozen in time. So if you want to up that number keeping them open will help do that. Otherwise they’ll be forever bringing it down slightly
I’ve found it’s virtually no affect to the scores using Clearscore, Credit Karma, and Experian to check.
For me Experian stays at 999, Equifax near 1000, TransUnion has the biggest change currently 661/710 (I don’t think it’s ever been above 700)
I constantly take the switching bribes throughout the year as soon as I’m eligible to claim again. 3 in the last six months.
I do however have a mortgage (9 years+) which maintains a long age of credit. So I would suggest keeping the longest bank account open if you don’t.
The scores are a bit irrelevant tbh it’s whatever the lenders criteria is. They might not even care that you have 1 bank or have opened twenty in the last week.
What do you actually want your credit ‘score’ for? Lenders don’t see a credit score, they make decisions based on your credit file. Realistically, it’s unlikely someone wouldn’t lend you something based on how many current accounts you’ve had, but then again we don’t know how lenders make their decisions so we can’t be sure.
It feels most likely to affect a new overdraft application - they may feel you are likely to leave them, and overdrafts are usually there to keep customers with the same bank. It feels unlikely to be relevant to a credit card application, and almost definitely completely irrelevant to a mortgage lender or similar
Maybe my naivety here, but I thought the credit score dictated what the rates were they would give you? For any kind of lending? I wasn’t intending to get any new credit this year unless something catastrophic happens that I can’t cover with savings.
A lender will call the API(s) of the CRAs (TransUnion, Equifax, Experian) to get your file and with that the score and category you fall into low-high risk. Some might call one or two to cross-reference. Generally they contain nearly the same information.
The might if they are a small lender rely on that scoring directly to set their rates or deny you altogether.
However most lenders will have their own criteria which they use the information in the file to check against.
Okay, perhaps I’m just finding something to worry about in the absence of any worries at the moment then!
I was just worried all the switching about had hamstrung me in someway!
Yes as above, lenders work with their own criteria. The ‘credit score’ is an estimation of what the credit score company thinks your credit worthiness is, but different products and lenders have different criteria. And don’t forget, generally they want to lend you money and they want to offer competitive rates - that’s how they make money.
I would say paying bills on time and not having any CCJs against you are the biggest factors.
Having one account/mortgage that is open for a long time is recommended. Being on the electoral roll is positive.
Setting up a bank account and swapping that multiple times has little impact on how the CRAs score in my experience, however that doesn’t guarantee that a lender isn’t using how many bank accounts recently opened as a factor.
Most lenders will be most interested in credit instead, they want to see you can manage that and aren’t going to be struggling to afford the repayments.
I would like to believe that they really couldn’t care less if you have one or a hundred bank accounts. That doesn’t mean if you’re a good or bad egg.
My credit card offers completely changed when I got a mortgage, pretty much overnight. It went from about 2k limits (way less than I could afford) to about 15k (way more than I could ever afford to pay back). I guess the stability / owning something is a big green flag for them.
Sweet, thanks for the advice/reassurance!
Credit scores and the associated numbers are made up by the various agencies. They do this in the hope that some side product they have for sale will go into your basket.
Don’t focus on numbers, just focus on is your report factually correct and just pay off everything as and when a bill pops up. Don’t use too much credit if you don’t need to.
The different credit agencies also mark you down for different things. For example:
Hard searches: these will lower your score from Equifax (ClearScore), but Transunion (Credit Karma) specifically says they don’t impact your score. Experian also doesn’t seem to like these.
New accounts: these will lower your score from Transunion, but Equifax doesn’t care, while Experian does.
Credit usage: this will affect your score with Transunion, but Equifax and Experian don’t care. I took 2 cards from >50% usage to 49%, and then from >25% to 24%, both times my Transunion score improved, meanwhile the scores with Equifax and Experian were both already at 1000/1000 and 999/999 the whole time.
Essentially, it’s largely a load of nonsense as the same things will have different impacts with different agencies. Even then, having a great score can still mean you get rejected.
I once tried to get on the Apple iPhone upgrade program, would have been like £50 a month or something. I had a great credit history but got rejected. They said they couldn’t tell me why, but may have been “score” too low - they use Experian and it was 989/999, or something (98X at least), so what was I supposed to do. Applied for regular finance for the same phone at the same price and got approved.
So, even when you do everything they say and have high scores, you can still be rejected.
My advice would be to not get hung up on these reports and the score they give you because half the time they may as well be throwing a dart at a dartboard. Just make sure you manage things responsibly, do what you know is sensible, and if you get approved in future then great, if not then try somewhere else as they might have completely different criteria.
The highest mine has ever been is 649/710 and the only thing left to optimise there is time on the electoral roll. I don’t know what else there could possibly be left in their algorithm to make up the rest of the points.
Don’t think Chase reports to any CRAs so wouldn’t worry about that one
In the US, FICO credit score is a standardised public formula which does dictate decisions and rates.
Not a thing in the rest of the world.
For example, moneysavingexpert credit club beta (free) shows something more useful - likelihood of approval for top credit deals. And it shows like 60%, 80%, 90%. Which is a more useful indication of how likely one can apply and get approved for the best deals available. Since “credit scores” in the UK are a CRA propietary formula not actually used for decisions or rates by lenders.
It’s still the same three CRAs we have Experian, Equifax and TransUnion in the US
FICO is a credit ratings business.
They take the reports from the CRAs and produce their own scoring system.
A lender then can instead of bothering to come up with their own criteria just call FICOs API and base it off their result.
The other credit ratings business is Vantage (Which is a collaboration created between the three CRAs) which have VantageScore as their brand like FICO Score
Well then according to them I’m buggered… 69% approval rating. In this case not the sexiest number…
Although they also list account age and number of recently opened account as a factor. Which I guess is FD as that’s the only new account I went for a OD with. The £250 Buffer felt useful and I finally decided to pull the trigger on a new phone, which I didn’t realise (foolish I know) would show up as a credit contract!
New credit accounts will show up as a factor, because it’d be clearly a risk factor if someone was opening loads of new accounts at the same time.
Then again, does it matter. You have more available credit because of the overdraft. The whole point of building a credit rating is access to more credit. So you are just achieving the aim set out for