Do Bank Accounts Affect Your Credit Score?

Your checking and savings accounts don’t appear on your credit report, and your balance doesn’t affect your credit score. A bank account with $50 or $50,000 in it looks the same to FICO. But bank accounts can affect your credit in a few indirect ways, good and bad, and they have their own separate reporting system that can matter when you open a new account.

What doesn’t affect your score

• Your balances. Credit reports don’t include bank balances, savings, or income.
• Opening or closing a bank account. Banks usually check a different database (more below), not your credit report.
• An occasional overdraft that you repay. If you cover it promptly, it stays between you and the bank.

What can hurt your credit

An overdraft that goes to collections. If an account is overdrawn and you don’t repay it, the bank may close the account and send the balance to a collection agency. That collection can then appear on your credit reports and stay for up to seven years.

Overdraft lines of credit. Some banks link your checking account to an actual credit line to cover overdrafts. Because it’s a loan, it may be reported like one, and missed payments on it can hurt your score.

Bounced payments to creditors. If your autopay to a credit card or loan bounces because the account is empty, that creditor can report a late payment once it’s 30 days past due.

ChexSystems: the banking “credit report”

Banks and credit unions use separate consumer reporting agencies, the best known being ChexSystems, to screen new customers. These reports track problems like unpaid negative balances, bounced checks, and accounts closed for cause. Negative records generally stay for about five years.

A ChexSystems record won’t lower your credit score, but it can get you turned down for a new checking account. You’re entitled to a free copy of your report once a year, and whenever a bank denies you an account based on it. Errors can be disputed, just like credit report errors. If you have a record, look for “second chance” checking accounts, which are designed for people rebuilding their banking history.

How bank accounts can help your credit

Autopay prevents late payments. Payment history is the biggest single factor in your score, about 35% of a FICO score. Setting up automatic minimum payments from checking on every card and loan is the simplest way to protect it. Keep a cushion in the account so autopay never bounces.

Experian Boost. This free service lets you link your bank account so Experian can find on-time payments for utilities, phone, internet, streaming, insurance and some rent, and add them to your Experian credit file. It ignores late payments, so it can’t hurt your score. It only affects scores calculated from Experian data, and results vary; people with thin credit files tend to benefit most.

Secured cards and credit-builder loans. Many banks and credit unions offer a secured card backed by a deposit, or a credit-builder loan where your payments go into a savings account you get at the end. Both report to the credit bureaus and build real history. How to Raise Your Credit Score explains how to use them.

A relationship can help with approvals. Some banks and credit unions consider your history with them, such as how long you’ve been a customer and whether your account stays positive, when you apply for a card or loan. That’s the bank’s own decision, not part of your credit score, but it can tip a borderline application.

Simple habits

• Turn on low-balance alerts.
• Consider turning off overdraft “coverage” for debit card purchases so they’re declined instead of triggering a fee.
• Keep a small buffer in checking for autopays.
• If you do overdraw, repay it quickly, before the bank closes the account.

For the full picture of what does drive your score, see Understanding Credit Score.

Sources

• Experian: Does an overdraft affect your credit score?
• Experian: How to clean up a ChexSystems report
• Experian: What is Experian Boost?
• myFICO: What’s in your credit score

This article is for educational purposes and is not financial advice.