How changing address affects your credit score

Whether you are about to move or have already moved, it is important to know how changing address affects your credit score.

Thankfully, the most stressful part of moving to a new address will have more to do with storage boxes than credit scores! However, like many things in the world of personal finances, there are other factors to consider.

Failure to update your details could have serious ramifications on your credit score and your finances in general, so let's take a deeper look at how this works.

Why your address matters

When applying for a credit card, loan, or another credit product, you will be asked to provide your address (so the lender can contact you). Along with your name and date of birth, your address is one of the few things reliably available from every lender you have an account with. For this reason, credit reporting bureaus use your address to:

1. verify your identity and distinguish you from someone else with the same name who may be living in the same city; and
2. find all the various accounts you have and attribute them correctly to you.

It's very important to use the same address consistently across all your accounts. This is especially true given the confusing format of some addresses, like those of a flat or unit in a complex. While the credit reporting bureaus have algorithms to detect similar addresses — 1 Main St. and 1, Main St can be identified as being the same as 1 Main Street — don't make it any more difficult that it has to be.

Does changing address damage your credit score?

No. Moving to a new address does not change your credit score. However, the risk profiles used by lenders do take into consideration the length of time you have been at the same address (the longer the better). Frequently moving from one address to another may not hurt your credit score, but to a lender you may look less like a stable, creditworthy customer.

Experian, for example, are explicit about a change of address having no effect: "Addresses have no impact on your credit worthiness or your credit scores".

Not updating the address for accounts is a problem

So if moving to a new address does not cause your score to drop, then what is the problem? Well, actually, a couple of things can go wrong.

Incomplete or split / mixed report

If you have two accounts with one registered to your old address and the other to your new address, you may end up having two split reports instead of one complete report. Obviously, this can cause problems, especially if you want to apply for a new credit product.

Missing payments

If you move to a new address and do not use a direct debit to pay, the lender will continue to send your bills to your old address. Unless you are proactive, it's possible that you may miss a payment (or even default if enough time passes). This will inevitably cause your score to drop.

What to do about it

Both of these problems can be addressed — pardon the pun — quite easily as follows.

• Update your address at any of the lenders you have an open account with — banks, credit cards, leases, utilities, and insurance companies, etc. — so they send your bills to your new address and pass on your new address to credit reporting bureas. You can do this online or by phone.
• If you haven't done so already, set up a direct debit to pay your bills automatically.
• Sign up for paperless billing so that statements and bills are sent to an email address you check regularly.
• Use the mail redirection service from Australia Post to make sure any paper bills sent to your old address are delivered to your new address. It costs $165 for 12 months and you can add up to 6 names, including maiden names. Australia Post have an optional service to inform "selected providers" of your change of address, but this should not replace you updating them yourself.

International changes of address

A commonly asked question when moving internationally is whether your credit score can move with you. The answer is clear: no.

While credit reporting bureaus like Experian and Equifax operate internationally, your credit report does not travel across borders and you will have to build your credit from scratch.

If you think you will be spending a relatively short time overseas, you can leave some of your accounts open — ideally those with no annual fee — so that your credit history is maintained. Do note, however, that you must continueto make repayments to service debts in your home country. For example, moving to Australia from Canada and failing to meet repayment commitments on your Canadian credit card will mean that your credit score in Canada will take a significant hit — plus the bill, interest accrued, and even possible legal action will have to be dealt with upon your return home.

Do you need to notify the credit reporting bureaus when moving?

You do not need to let the credit reporting bureaus know that you have changed address. They will get the details of your new address from the lenders you have accounts with, which is why it is important you keep your accounts up to date.

Since lenders don't report updated data until the end of the billing cycle, it may take some time — typically 30 - 45 days — before your new address appears on your credit report.

Image: "House Sold" by aag_photos is licensed with CC BY-SA 2.0.