Will Opening a Savings Account Affect My Credit Score?

If you are thinking about opening a savings account, you may be asking yourself whether opening a savings account will affect your credit score? We will answer this question in much detail below.

Will Opening a Savings Account Affect My Credit Score?

No, opening a savings account will not affect your credit score because a hard inquiry is not placed on your credit report when you open an account. Also, your savings account is not reported to the credit reporting bureaus, so opening a savings account, as well as making any deposits or withdrawals that you make will not affect your credit score.

Whenever you open a savings account, most banks and credit unions will perform a soft pull to review your credit report prior to opening your savings. A soft pull, commonly known as a soft inquiry, does not affect your credit score and will, therefore, not lower it.

Soft inquiries do not affect your credit because your credit report is not reviewed for the purpose of extending credit to you, rather the check is conduct to simply ensure that there is no negative information on your report prohibiting the bank from opening an account for you.

A hard inquiry, on the other hand, does affect your credit score and can lower it. Hard inquiries are typically added to a person’s credit report when he’s seeking to borrow money. For example, if you apply for a credit card or a loan, a hard inquiry is typically placed on your credit report to alert future lenders that you’ve been seeking credit.

Too many hard inquiries within a short period of time can significantly lower your credit score. They also raise red flags to future lenders and creditors because too many of them within a short period of time signifies that you could be in financial trouble and are therefore turning to credit to finance your life.

That said, rest assured that opening a savings account will not affect your credit score as a soft inquiry is used to review a copy of your credit report.

Do Deposits and Withdrawal to Your Savings Account Affect Your Credit Score?

No, deposits and withdrawals to your savings account do not affect your credit score because the status of your savings account is not reported to the credit reporting. Since it’s not on your credit report, it will not affect your credit score. This is so because your credit score is only calculated using accounts that appear on your credit report.

How Can a Savings Account Help Your Credit?

Keeping some money in your savings account for emergencies can help your credit. For example, if you had to go to a hospital for an emergency visit, you may have received a hefty medical bill within days of your release. If your medical bill is left unpaid, it could be sold to a collection agency that can cause significant damage to your credit. However, emergency funds in your savings account can be used to pay these medical, saving your credit from being damaged.

How Can a Savings Account Indirectly Hurt Your Credit?

Although opening and maintaining a savings account will not hurt or affect your credit in any way shape or form, an overdrawn savings account can indirectly hurt your credit score.

Having a negative balance on your savings account will not hurt your credit because the status of your credit score is not reported to the credit reporting bureaus.

However, if you leave your savings account with a negative balance for too long, your bank may sell the negative balance (debt) to a collection agency. The collection agency will then attempt to collect the money from you.

In attempting to collect the money, many collection agencies will add a collection account to your credit report. A single collection account can drop your credit score by up to 100 points.

For example, if you withdraw $700 from your savings account when you only had $500 in your savings, your account would show a negative balance of -$200. If this negative balance is left unpaid for a long period of time, your bank may sell the debt to a collection agency that will then come after you for that amount.

So, if you care about your credit, you should always ensure that you have sufficient money in it to cover your transactions.

Impact of Your Savings Account On Borrowing Money

Although your savings account does not affect your credit score, maintaining a savings account in good standing is important for obtaining some types of credit and loans. This is so because when lenders see that you have savings, they will be more willing to lend you money because your assets reduce the risk to the lender. Your assets reduce the risk to the lender because the lender has something to take from you in the event that you default on making your payments. As such, although your savings account does not affect your credit score, it may be considered by some lenders when they’re trying to decide whether to lend you money.

Can You Build Credit With a Savings Account?

No, you cannot build credit with a savings account. The status of savings accounts is not typically reported to the credit reporting, as such, it does not appear on your credit report. Since it does not appear on your credit report, it does not affect your credit score.

Will Applying For a Savings Account Affect Your Credit Score?

No, typically, opening a savings account does not affect your credit report because banks and credit union conduct what is known as a soft pull when reviewing your credit report. Soft pulls, commonly known as soft inquiries, do not impact your credit score. Soft inquiries are different from hard inquiries and hard inquiries can lower your credit score by a few points.

Will Closing a Savings Account Impact Your Credit Score?

No, closing a savings account will not impact your credit score because the status of your savings account is not reported to the credit reporting bureaus. As such, opening a savings account, closing a savings account, as well as any deposits or withdrawals you make from it will have no effect on your credit score.

Bottom Line

At this point, it should be very apparent that opening or closing a savings account will not impact your credit because savings accounts are not reported to the credit reporting bureaus, since they do not appear on your credit report, they are not factored into your credit score. That said, in some limited circumstances, such as leaving a negative balance in your savings account could cause damage to your credit.