Opening a savings account does not impact your credit score because you aren’t borrowing money and the activity in your savings account isn’t reported to a credit agency. Most financial institutions will run a soft credit inquiry when you open a savings account but it is only to check your identity. Not sure that opening a savings account is the right move? Talk to a financial advisor to work through the details of your situation and to find the right account for your financial goals.
Why You Should Care About Your Credit Score
When it comes to your financial life, your credit score is a big deal. It’s similar to a report card about whether or not you manage your credit responsibly. The three-digit number can impact your finances in a wide variety of ways. With the right credit score, you’ll have access to better financing opportunities for major purchases. But the wrong credit score can take you completely out of the running for securing loans for big-ticket items, like a home or vehicle.
With this in mind, it’s perfectly natural to be concerned about whether or not opening a savings account affects your credit score. So, does opening a savings account affect your credit score?
Does Opening a Savings Account Affect Your Credit Score?
Simply put, no, opening a savings account does not impact your credit score because you’re not borrowing money. Financial institutions don’t generally run any type of credit report nor do they report your history to a credit agency. If a bank account is doing a soft credit inquiry it is typically only to verify your identity and not to use the information to make a decision on your opening an account.
If you are concerned about a potential hit to your credit score, reach out to the bank or credit union before opening your new savings account. A representative should be able to tell you all about the application process and what, if any, you should be worried about.
Credit Checks for Different Types of Savings Accounts
While banks don’t check your credit when you’re opening a savings account, they may check your deposit history depending on what type of savings account you open. For example, opening a savings account with built-in overdraft protection could increase the chances of a deposit check. But typically, high-yield savings accounts or money market accounts without any overdraft protection involved are relatively safe from any check.
Regardless of whether you plan to open your new savings account at a bank or credit union, the chances of a credit check are nonexistent. The bank might run what is called a ChexSystems report on your banking history. This is a consumer reporting agency that keeps track of banking-related history.
Hard Credit Inquiry vs. Soft Credit Inquiry: What’s the Difference?
Not all credit checks are created equally. Depending on the situation, you might encounter a hard credit inquiry or a soft credit inquiry when borrowing money.
A soft credit inquiry allows the financial institution to assess where your credit stands to some degree. But it won’t leave a mark on your credit report. As far as your credit report goes, a soft credit inquiry doesn’t make an impact. However, not all credit inquiries are minimally invasive. Instead, there are also hard credit inquiries.
A hard credit inquiry happens when a lender or financial institution requests your full credit report from a credit bureau. The information on your credit report affects your credit score, but some financial institutions like to take a closer look at the information for themselves to assess things like your debt-to-income ratio.
Typically, your credit score will dip by 2 to 10 points after a hard credit inquiry. Although the information stays on your report for up to two years, the negative impacts usually stop after a few months. This is why it is important to understand when your credit is going to be pulled and which type of credit pull is being performed. Opening a savings account only has the potential to trigger a soft credit inquiry and it doesn’t impact your credit score.
How to Get the Most Out of a Savings Account
Without a stash of savings tucked away somewhere, your financial situation can be unpredictable. A savings account often serves as the base for a strong financial foundation to help cover emergency or unexpected expenses and protect your other finances. Here are some tips to set up your savings account for the best overall financial situation:
- Put your savings on autopilot: If possible, set up an automatic recurring transfer to save a portion of every paycheck. By taking advantage of technology, you can steadily build your savings.
- Build an emergency fund: Not sure what to put in your savings account? It’s usually a great place to store an emergency fund. Many experts recommend putting aside between 3 to 6 months of expenses for a rainy day. By separating out these funds from your checking account, you’ll know a safety net is there when you need it.
- Watch out for the fees: Before signing up for a savings account, look for an option with no fees.
- Seek out a high APY: In case you haven’t noticed, many savings accounts at traditional banks offer abysmal APYs. The rates are so low, that you might ask yourself if the funds are better off under your mattress. Luckily, there are high-yield savings accounts available. If possible, opt for a savings account with a stellar APY to put your funds to work for you.
The Bottom Line
When you open a savings account, it won’t impact your credit score because any financial institution that is checking your credit for a savings account is only performing a soft credit inquiry to verify your identity. You aren’t borrowing money and in fact, are giving money to the bank for them to use in investments while you earn interest so your credit history isn’t relevant.
Tips for Saving Money
- Not sure how a savings account fits into your financial plans? A financial advisor can help you find the right savings account based on your goals and make sure it is part of your larger financial picture. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When your savings account is open, make a plan to maximize your savings. One option is to set up a recurring transfer to grow your savings over time. Take advantage of SmartAsset’s free savings calculator to visualize how your savings could grow.
©iStock.com/Brothers91, ©iStock.com/SDI Productions, ©iStock.com/RichVintage