Does Opening Bank Account Affect Credit Score?

New bank account: Some individuals are usually concerned with whether opening a new account will affect their credit score. Of course, any new credit such as a credit card or a loan that you apply for can always affect your score. Does opening something as innocent as a checking or savings account also alter this critical financial rate?

The short answer is no: the act of opening a new bank account does not impact your credit score in any manner. This is because; checking and savings are not considered to be standard deposit accounts but rather lines of credit. You are not using money from your pocket to borrow money from the bank. However, rather than storing money belonging to others that can be demanded at any given time, you are storing your own money for later use. There is no credit check, and that information is not reported to the major credit reporting agencies.

With that said, it is possible to look at a couple of the more roundabout methods through which the possession of a bank account could slowly affect your credit over time. Now, let us proceed with a discussion of how the credit score is determined and some of the consequences resulting from having a checking or a savings account.

The following are the factors that affect the computation of credit score

A credit score is a numerical figure between 300 and 850 that reflects your creditworthiness. The FICO score is the most popular scoring model currently employed by lenders. According to myFICO, here are the main factors that help determine this important number.

• Payment History: Do you keep up with your credit accounts such as credit cards and loans in terms of payment? This category contributes 35% of your score.
• Credit Utilization: What portions of your total credit limits have been utilized at the moment? This factor is scored at 30% of your total score.
• Length of Credit History: Overall, a longer credit history that demonstrates responsible credit usage is preferable. This category contributes 15% to the overall score.
• Mix of Credit: When making choices on credit, lenders prefer individuals who can manage credit cards, and installment loans among others. This factor is equivalent to 10% of your total score.
• New Credit Applications: Sometimes, credit scores can also be reduced by applying for a lot of new credit. This factor makes up 10 % of your total.

As you can see, nowhere in credit scoring criteria do you find bank accounts themselves as being of direct importance. They do not get forwarded to the credit bureaus to be included in your credit reports. Since no account information is being reported, they cannot change your score at that moment.

How Does Maintenance of the Bank Accounts Impact Credit in the Long Run?

Of course, having a Bank Account does not make it irrelevant to the matter of your financial affairs. Here are some indirect ways where a checking or savings account could influence your credit score incrementally.

Establishing Payment History This is something that affects your credit score greatly, meaning that your history of payments is very important. It has been argued that a bank account is not a line of credit but having one helps in meeting your credit card statements and loans every month. The funds have to come from somewhere, and your bank account is where you likely keep money to cover these fixed payments. If you’ve been consistently making your payments towards your debts, you’ll have a higher credit score.

Having a Money Buffer A bank account also provides you with more financial flexibility in the case that there are some emergent costs. With no money saved, you may have to turn to credit cards or personal loans to make it through the time that you are paid less than you spend. This action can help reduce your credit utilization and the mix of credit factors depending on the type of high-interest debt you are willing to incur. That way you probably won’t need to apply for new forms of credit in an emergency which can be very risky.

Showing Financial Stability Even though credit bureaus do not get your bank account transaction details, your bank statements are available if the lender asks for them when you apply for a mortgage, an auto loan, or any other credit. When you submit bank statements, it is better to have constant direct deposits in addition to occasional and frequent payments since it proves that you receive a certain amount of money regularly and use it properly. This level of financial stability increases the willingness of lenders to extend credit to applicants seeking new credit facilities.

Obtaining Secured Credit There are credit products such as secured credit cards or secured loans, which come with collateral in the form of a cash deposit or checking account balance. These types of accounts are most suitable for individuals who are in the process of building credit history or rebuilding it. The availability of the required funds in a checking or savings account gives you access to special secured credit products that are reported to the credit bureaus. It can then help to slowly build up the credit rating through on-time payments.

The Bottom Line

Bank accounts are not involved in the process of building and improving your credit score but they support the process indirectly. Unlike checking or savings accounts, it is not a line of credit that necessitates credit checks or reporting payment data to credit bureaus. Of course, it is beneficial to have a positive balance in your checking account to ensure that you are financially stable to meet your credit obligations that affect your score.

If you have positively no credit file at all, then you can apply and open a new account to be able to apply for the type of credit like secured cards. Pursuing the growth of your savings allows you to have a safety cushion in case of such moments when unnecessary purchases turn into threats of higher credit utilization. So, as a result of applying to open a checking or savings account, the three-digit number that lenders look at when you apply for future loans or credit cards will not change by default.

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