At a Glance
Having a bank account (or two) is an important financial milestone, and it’s often required to have an account if you ever apply for a credit card or loan. It’s even recommended to have multiple bank accounts to help make managing finances easier. But does opening a new account impact your credit score? In most cases, no, but there are a few exceptions.
In this article, you’ll learn:
Do bank accounts play a role in getting credit?
When you apply for a credit card or loan, the creditor will look at your credit report and credit score, not your bank account. That said, you may need a bank account to get a loan or line of credit because many lenders review your account balances as part of the application process. This is to ensure you have enough cash on hand to validate extending the line of credit to you.
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Can your bank activity affect your credit?
Typically, opening a checking or savings account won’t affect your credit score. That said, the primary ways your bank activity can affect your credit are:
- You overdraw your account but don’t pay any overdraft fees you may be liable for.
- You close your account with a negative balance.
Withdrawals, auto-pay, deposits, and similar transactions will not impact your score.
How to start building credit with a bank account?
A traditional checking or savings account generally won’t help you build credit. However, if you have no or limited credit, there are a few ways you can work with your bank to build it:
1. Credit builder loans
Many banks offer credit builder loans, which don’t require good or excellent credit to get approved. The amounts are small, and you won’t get the funds immediately. The total loan amount will be held in a secured bank account and you’ll make monthly payments toward that account. Those payments will be reported to the credit bureaus. Then, when the loan balance is paid off, the bank will disburse the funds to you.
Related: What is a Credit Builder Loan?
2. Debit cards
Some banks also offer debit cards that report payments to the credit bureaus. It links to your bank account and your payment history is reported each month. No security deposit is required.
How do different bank accounts affect your credit score?
In most cases, opening a checking or savings account will not impact your credit score. When you open an account, the financial institution may run a soft credit inquiry on your credit, but these do not affect your score. The bank will contact an account verification service, such as ChexSystems, which is similar to the credit bureaus but for bank accounts.
The exception to that is if you opt into overdraft protection, because in that case, you may be subject to a hard inquiry (which can lower your score by a few points). Some overdraft protection options essentially act as a line of credit that the bank will withdraw from if your account has insufficient funds. So, they will want to know you’re a responsible, low-risk borrower, which can be indicated in your credit report and score.
1. Checking account
Your checking account can impact your credit score if:
- You enroll in overdraft protection, which will trigger a hard credit inquiry.
- You don’t pay any overdraft fees you owe.
- You close your account with a negative balance.
2. Savings account
It’s unlikely that your savings account will affect your credit score unless you incur any fees and don’t pay them or close your account with a negative balance.
3. Money market account
Like a checking account, if you enroll in overdraft protection, it will trigger a hard credit inquiry that can drop your score by a few points.
4. High-yield savings account
Even though this is technically a savings account, enrollment in overdraft protection can still impact your score due to the hard inquiry.
How to avoid bank accounts from impacting your credit score
The good news is there are easy ways to prevent impact on your score from your bank accounts:
1. Void overdraft
Overdrafting is when you spend more than what’s in your account. If you have overdraft protection, the bank will usually cover the difference, but you may be charged overdraft protection fees and you’ll have to repay what you overdrew. Even if you do overdraft, as long as you promptly back the fees and what you owe, your score won’t be impacted.
Avoid over-drafting by regularly checking your balances and ensuring you don’t spend over that amount. This is especially the case if you have autopay set up on any of your accounts. If you frequently overdraft, consider dropping overdraft protection. Instead of the bank covering the amount and charging you a fee, your card will be declined and the transaction won’t be completed.
2. Check the balance before closing an account
If you’re closing an account for any reason, make sure the balance isn’t negative. Negative balances on closed accounts are reported to the credit bureaus, so before closing an account, double-check with the bank that it’s safe to close.
3. Monitor your score
Your credit score can be impacted by a lot of things, including your payment history, length of credit history, credit mix, credit utilization ratio, and other factors. It’s important to check your score regularly so that you know if it needs work, or if you’re doing a good job being a responsible borrower. If you notice a drop in your score, check your credit report to learn why.
You can also get your free credit score by creating a MyCredello account. Plus, get personalized recommendations and tools to help you build long-term credit habits.
Cash management accounts are alternatives to traditional bank accounts, typically offered by online banks. These accounts usually do not perform a hard inquiry when you open an account.
Multiple bank accounts won’t affect your credit score, but your account history could show up in a ChexSystems report so banks, where you open the new accounts, can see what other accounts you may have.
No, unless you’re closing an account with a negative balance, switching banks typically does not affect your credit score.
When you apply for a credit card, the card issuer will run a hard credit inquiry, which does impact your score by a few points for a short period.