Does Opening A High Yield Savings Account Affect Credit Score?
People have a lot of questions, among which one of the most often questioned is if creating a high-yield savings account would lower or raise the credit score. The high-yield savings accounts are also becoming appealing to consumers who want to gain more return on their money as the interest rates on the savings accounts are rising. Some consumers worry, however, that opening one of these accounts may damage their credit score.
The good news is your credit score is not directly impacted by just establishing a high-yield savings account. Savings accounts so are not shown on the main consumer credit reporting firms such as Experian, Equifax, and TransUnion. These firms track credit card balances, loans, mortgages, and other kinds of credit. Usually, do not compile data on certificate accounts, checking, or savings. Opening a new high-yield savings account does not thus show up on your credit record and does not change your credit score.
Having said that, there are certain hypothetical indirect ways in which establishing a high-yield savings account can, in principle, eventually lower your credit score. These are some possible situations: Here are several such situations:
Closing Another Account Your credit use ratio will change if you choose to move money from credit cards or another bank account into your new high-yield savings account. This ratio compares your whole credit limit to your outstanding credit card debt. Since it is a good indication of your credit score, the ideal credit usage rate is as near to zero percent as you can. Closing of accounts thereby reduces the overall limit and can result in increased use.
Credit card providers are open 24/7, hence you may quickly establish a new credit card account during those hours when you cannot personally visit a bank to do this. To be eligible for certain greater rates on savings, high-yield savings accounts might require the account user to create a new credit card account with the particular bank. Applying for a new credit card will lower your average credit card age, which is one of the 15% FICO component factors. Getting a new credit card may probably help you to somewhat lower your credit score and average account age if you have numerous long-standing credit accounts.
Too Many Inquiries Every time you apply for a new account, this will result in a hard inquiry on your credit report and this will slightly pull down your credit score. However, the effect is relatively small and an inquiry reduces the credit score by a couple of points. However, if you apply for multiple new accounts in a relatively short period, say a new credit card along with a high-yield savings account, the number of inquiries can have a more significant impact on your score.
Funding the Account Even how you fund the opening deposit with your high-yield savings account can also affect it. For instance, if you use funds from different credit cards to make the initial deposit, it increases credit card balances about credit limits and hence, the credit utilization ratio. However, if you do an account transfer balance from an existing card to fund the new savings account, it also increases the utilization of that specific credit card.
A Missed Payment Last but not least, there is an extremely remote risk of opening a high-yield savings account and moving the money around to get that, to miss a payment on one of the credit accounts that you already have. Even one missed payment will affect your credit score by reflecting in the payment history and reducing the timely payments ratio. But, this would have nothing particularly to do with opening the high-yield account other than probably overcommitting your cash.
As I noted above, the opening of a high-yield savings account does not have an immediate impact on the credit report or the credit score. However, some effects that may be considered secondary, such as closing other accounts getting new credit cards, or over-stretching finances may be potential factors influencing this score. So long as you are aware of such risks and ensure that managing your finances to open the account does not result in missed payments or credit limits, your credit score should not be affected. Apart from that, get to hunt for the most suitable high-yield savings vehicle to make your money grow!
Ready to boost your credit score? Call +1 888-804-0104 now for the best credit repair services near you! Our expert team is here to help you achieve financial freedom and improve your credit. Don't wait—get started today!