So how do multiple Current Accounts affect a credit score?


(Bradley) #1

I must point out however that having several current accounts, particularly inactive accounts or those with an available overdraft, can affect your credit score.


How does the Monzo current account affect my overall credit score?
Upgraded Monzo Accounts for Everyone!
(knows someone who knows Tom quite well) #2

Do you have any evidence at all for this? I would completely disagree based on opening many current accounts and seeing my credit score unchanged on both clearscore and the MSE experian.


(Jolin) #3

I agree with DaveTMG. I’d like to see proof of this. Never been an issue for me. There’s a lot of mythology around ‘credit scores’. I wouldn’t suggest arranging one’s life around what is a mixture of urban myths and a scam.


(Bradley) #4

I do not have evidence per se, but I thought this was general common knowledge. I must point out, I know the idea of a common inter-lender credit score is a myth, as individual lenders conduct their own checks and assessments.

Financial institutions will however gauge your lending risk depending on the amount of available credit, hence why multiple overdrafts can impact your ‘score’. In the case of a small number of accounts, I can’t see there being a problem at all. But it’s good practice to close old inactive accounts.


(Bradley) #5

Also this obviously only applies if you’re considering taking out a loan, credit card or mortgage in the near future. Otherwise a ‘credit score/rating’ doesn’t really matter all that much.


(knows someone who knows Tom quite well) #6

Again this is a myth. They gauge your risk based on their own algorithms. If you read what clearscore say about positive and negatives on your file, they actually say that available but unused credit is a positive.


(Bradley) #7

If they do this based upon their own algorithms (which is what I originally alluded to anyway) then you calling this a myth is ironic, because you do not know the precise assessment each lender performs.

You are perhaps correct in pointing out that not all lenders do this or follow the same formula. I will put my hands up and say that I don’t know what each lender does as well, but I’m simply repeating advice from several financial advisory sources.

I.e.: https://www.moneywise.co.uk/cards-loans/credit-cards/easy-ways-to-boost-your-credit-rating , http://www.moneysavingadvice.co.uk/guide/does-an-overdraft-hurt-your-credit-score/ , http://www.experian.co.uk/consumer/improve-credit-score.html

From Experian for instance:

“Consider closing unused accounts
Consider closing unused credit accounts if you no longer require them. Lenders can take into account the credit limits available to you, not just what you currently owe. It could be better to have fewer, well-managed accounts, and long-standing accounts with good histories.”


(knows someone who knows Tom quite well) #8

And yet, clearscore, say:

I have way more open accounts than most - I’m sure they would point it out if it was a factor

Mostly credit scoring is about default and arrears, especially CCJs. Everything else is pretty much noise to get you coming back to check your score so they can recommend new products to you.


(Allie) #9

It’s both, really. It’s a risk in that it’s there and could be used, but a positive in that it shows discipline and not using all credit made available to you. My understanding is that in most scoring models this is a net positive except for extreme edge cases (e.g. many multiples of your income in available credit).


#10

I also have way more than 1 current account (10 at last count), although not all are in my UK credit file (some are abroad). None of this was a problem when applying for a mortgage, or a credit card - both very recent.

I should note that I have only a very small overdraft on one account (which I have never used), and 4 credit cards, with a combined credit limit of around 1/3 of my annual salary.

None of this so much as raised an eyebrow from my mortgage broker. His only questions were (a) Were any of these accounts opened in the last 12 months? (He said that recently opened ones can sometimes cause issues) (b) What’s your current outstanding combined balance on your credit card? (He said that ideally this should be 0, so I paid them all off.)


(Bradley) #11

I think we can all agree it’s not clear cut :joy:


(Brian Hunter) #12

DaveTMG has promised me that multiple current accounts does not negatively impact your credit score, so I’m going with that. He’s got loads, so he knows.


(Jamie 🏳️‍🌈) #13

Also, you don’t have a credit score to impact.


(Patrick) #14

It’s just opening a lot in a short time (lots of hard searches) that could potentially have a detrimental effect. The number of accounts overall doesn’t affect it and could potentially have a positive effect (lots of high credit limits but low use of that credit).

That’s how I understood it anyway.


#15

Mhm. Hard searches are the things to look out for.

Soft searches and footprints are not seen by other lenders.


#16

I would really like you to modify the opening post of this thread, as at best it has proved to not always be accurate, and at worst is just a myth that people will read as a first post and take as truth.

I can also say I’ve always had 4-5 current accounts, often left with a couple of years at a time with no activity and had no impact on any credit report.


(knows someone who knows Tom quite well) #17

So MSE sent me a teaser email today to get me to log in and be offered overpriced credit cards check my credit score with experian.

One of the ‘why might your score have changed’ boxes was the following:


(Patrick) #18

I obsessively check my credit ratings and it always goes up after I close an account. It’s never caused it to go down!

I assumed because it’s recorded as successfully settled.


(Andre Borie) #19

But then again this “score” is just an imaginary number generated by whatever service you use to see your credit history - lenders use the info on your credit file (amount of debt, etc) directly and make their own decision. I don’t see why lenders would care about the number of accounts as long as the important stuff (history of regular repayments, etc) is good; so while your pointless “score” might briefly go down, I don’t think lenders actually care about how many accounts you have.


(knows someone who knows Tom quite well) #20

Preaching to the converted here! I was just responding to the ‘clearing up old accounts improves your score’ suggestion.