With inflation on the rise and eating away at people’s earnings, it has never been more important to ensure one is getting the best interest rates to counteract the impact of inflation. However, people should be aware that switching banks may also affect their credit score.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, gave her advice for switching bank accounts as a means of beating inflation.
She said: “There has been a notable uplift to market-leading savings rates on offer since last month across various types of accounts and terms, which is positive to see.
“However, inflation is eating its way into savers’ hard-earned cash and with the expectation for it to rise, its eroding power will not be easing any time soon.
“Savers would be wise to not let this deter them from finding a more attractive rate.
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She continued: “Signing up to rate alerts and newsletters to keep abreast of the changing top rate tables is a good idea, as savers may need to act swiftly to take advantage.”
However, while switching banks can be a sensible course of action, it is worth noting there is a chance this could impact one’s credit score.
Credit scores are an important part of one’s financial health, but they can cause some people a lot of confusion.
Knowing the dos and don’ts of improving one’s credit score can help to avoid mistakes.
When opening a bank account, the bank will conduct a credit check.
Credit checks are also done when applying for credit cards and other types of credit, but there is a difference between the type of check that is carried out.
When applying for a credit card, mortgage or loan, a ‘hard’ credit check will be done.
Hard checks will stay on one’s credit file and according to finder.com, will be visible for up to seven years.
It is understood that a credit check will reduce one’s score, but it can often have only a minimal impact.
However, many banks will not conduct a ‘hard’ search when someone tries to open an account.
They may only carry out a ‘soft’ check, which are still recorded on one’s credit file, but only the individual can see them.
This means that lenders will not have access to this information.
It is therefore important to be aware when going through an application process whether or not the bank one is applying to will conduct a ‘hard’ or a ‘soft’ check.
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