Martin Lewis shares bank account rule as he 'strongly advises' Barclays customer over 'impact'

Martin Lewis shares bank account rule as he 'strongly advises' Barclays customer over 'impact' Money Saving Expert Martin Lewis has examined the case of a Barclays customer and a 'very interesting question' Martin Lewis has explained an important rule for anyone with a bank account in the UK. The money-saving expert shared the update in the latest full episode of the Martin Lewis podcast, which looked into different kinds of bank credit searches that many people may not be fully aware of. During the programme, he heard about the situation of a Barclays customer - and after hearing his account, he said "there is an unknown here". The case concerned a listener named Dan from Sheffield. Dan sought Martin's guidance on switching bank accounts in a specific circumstance. He explained he had heard Martin provide advice about switching bank accounts. However, he said he was not sure whether now is the right moment to do so because his mortgage deal expires within the next six months, meaning he will need to apply for a new deal. He noted that Martin had previously mentioned to listeners that opening a new bank account places a so-called "hard search" on your credit file which can impact your credit score. A hard credit check is a thorough check of your financial history. By comparison, a soft credit check is just a top-level overview. Hard checks are typically conducted when a company is lending you money or another form of credit. They might be performed for a mortgage application, a student loan application, a personal loan or credit card application, a car loan application, or an apartment rental application. Dan explained: "I have a very good credit score so I decided one switch might be an acceptable risk so I opened a Chase account, set up a couple of charity direct debits and shortly after switched to the Barclays account that offers a £200 switching bonus." Martin, founder of the MoneySavingExpert website and a regular on ITV and BBC, then clarified to listeners that Chase doesn't offer overdrafts and therefore need to conduct hard searches, and that Dan is essentially proposing to use it as a 'burner' account. Barclays, in contrast, does perform hard searches, Martin noted. However, Dan went on to reveal that when he checked his Monzo banking app, both the Chase and Barclays searches appeared only as soft searches. "Can you confirm whether opening a bank account results in a hard search or a soft search, or does it depend on the account? Can I continue to switch willy-nilly without fear of it affecting my mortgage application?" A credit report will show you which companies have carried out credit checks on you. According to Barclaycard's website: "If you're planning to take out a loan or apply for a credit card, checking your credit report is a smart way to ensure you haven't had too many hard credit checks in a short period of time. Since this might harm your chances of being approved." Martin responded to Dan saying: "'What a very interesting question and there is an unknown in here." He said he would ask his staff to investigate Barclays' policy on the matter. Then he continued: "So in general terms, most bank account applications will do a hard search, because a bank account has an overdraft and an overdraft is a credit product and when you apply for a credit product, in most cases a hard search is used." There's no obligation and they can conduct a soft search, but most banks perform a hard search, he said. Chase UK doesn't have an overdraft facility so its soft check is effectively an ID check, he said. Martin said that a credit file, such as the one on Dan's Monzo app, does separately identify soft and hard searches. He explained: "Soft searches you can see but it doesn't tend to affect your creditworthiness - can't affect your creditworthiness. Hard searches you can see and do affect your creditworthiness." He said he would have expected Barclays to have conducted a hard search, but is unclear why this allegedly hasn't occurred in Dan's situation. He advised: "But what I would strongly in your mortgage position advise you to do is to consider that all bank account applications, unless you know they do a soft search, will do a hard search, and therefore could have an impact on your creditworthiness." What is a hard search on a bank account and can it be removed? According to Barclaycard's website, a hard search occurs when a company requests a copy of your full credit report. It notes: "Unlike soft searches, a hard credit search will leave a mark on your credit report. So if you've applied for credit, other lenders will see it if they do a hard credit search. "They also see if you were accepted or declined. Typically, any credit or loan application will stay on your report for up to two years." The website therefore emphasises the importance of avoiding multiple credit applications within a short timeframe, or reapplying immediately after being declined. Nevertheless, an occasional hard credit check is unlikely to significantly impact your credit score, the bank notes. Barclaycard mentions on its website that making too many credit applications in a short period of time could be an indication of financial problems – especially if the applications were refused. A potential lender could interpret this as a sign that you're a higher risk for a loan or other service, it warned. Experian advises UK customers that hard searches resulting from credit applications you've made cannot be removed. However, most hard searches will disappear from your report after a year. Their website offers says: "If you do have to make credit applications – whether for a new mobile phone contract, loan or a credit card – spacing them out can help protect your score. A good rule of thumb is no more than two or three applications every few months, although remember that different companies have different criteria when it comes to your credit score." Listen to the episode of the podcast in full here or listen to other podcasts of his here.