How Does Your Checking Account Affect Your Credit Score?

Typically, your bank account information is not displayed on your credit report, neither does it impact your credit score. However, lenders use information about your checking, savings, and assets in determining whether you have the capacity of taking on more debt.

When you apply for a loan and/or credit cards, lenders first check your credit score and credit report in order to see your open and closed credit accounts and loans and details about your payment history. With this, you can also tell how much available credit you have. Also with this, you can tell how much you’re using, if you’ve had any debt go to collections as well as the number of soft or hard inquiries on your account within the past two years.

How Does Your Checking Account Affect Your Credit Score

However, the credit report leaves out some important data which. According to Experian “information about assets like checking account balances. Savings account balances, certificates of deposit, individual retirement accounts. Stocks, bonds or other investments” are not listed in your credit profile.

It is at this point that your bank statements come into play.

Why Lenders Might Ask for more Information

Banks and lenders review everything ranging from your car. Loan to your mortgage whenever you apply for new credit because they. Need to assess your capacity in paying your bills.

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This is standard with mortgage lending, auto lending. And sometimes even personal loans. This may also come up when you are. Applying for a new credit card. Owing to the high unemployment rate and general economic uncertainty. Card issuers are tightening requirements on credit card approvals. And reviewing your income documentation and your credit score to see if you qualify.

The following transactions will not appear on a credit report or credit score:

  • Closing an account
  • Making a deposit or withdrawal
  • Having multiple accounts
  • Writing a check

If you have a check overdraft, it still will not appear on your report except you don’t pay the fees and the bank turns the bill over to a collection agency.

However, there are a few instances where a checking account could affect your credit score.

This happens when some banks or credit unions may look at your credit report when you open a new account. Usually, when this happens, they do a “soft pull”, which means they check your credit, even though it does not affect your credit score. Some banks on the other hand do a “hard pull” or “hard inquiry”, even though usually those are only used by lenders when you request credit or a loan. If the bank does a hard pull, it will impact your credit score for up to 12 months usually by dropping your score by five points or fewer.

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Another way a checking account may affect your credit score is if you sign up for overdraft protection on the account. When this happens, it sets up a new line of credit and possibly triggers a credit report inquiry as well as a report from the bank to the three major credit reporting bureaus. However this is not always the case, not all overdraft accounts are reported. To be sure if your account is reported or not, ask directly from your bank.

Even if a bank does not report a new checking account to the credit bureaus, it may check with ChexSystems. This is a consumer reporting agency for financial institutions. Banks will report mishandled checking and savings accounts to ChexSystems, which in turn shares the same information with banks in helping them determine the risk of opening new accounts. Reports to ChexSystems remain on file for five years.

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