Does Opening a Checking Account Affect Your Credit Score?

Opening a new checking account can make managing your money easier. There are many reasons why you may need to open a new checking account, such as switching banks, looking for lower fees, or taking advantage of better features.

Before you apply, you may wonder if your decision will impact your credit. That’s a normal concern, especially if you’re planning on applying for a loan or credit card soon.

The good news is that, in most cases, opening a checking account won’t affect your credit score. There are a few exceptions. Learning how banks review your application and what information they can report can help you avoid surprises.

Does opening a checking account affect your credit score?

The answer is usually no. Checking accounts are deposit accounts, not credit accounts, which means the activity isn’t reported to the credit bureaus or factored into your score.

Opening a new checking account won’t lower your score or shorten your credit history. Routine transactions like depositing or withdrawing money don’t get factored in, either. If you’re opening a standard checking account with no credit features attached, you can usually do so without worrying about your credit score changing.

When opening a checking account could affect your credit

There are a few instances where opening a new checking account could have a minor impact on your score.

Hard inquiries vs. soft inquiries

Many financial institutions want to know what your credit score is before giving you an account. The good news is that most banks and credit unions run a soft inquiry, if they run one at all. A soft check does not impact your score or show up on your credit report.

Some banks and credit unions will run a hard inquiry. When a hard credit check is conducted, it can cause your score to drop by a few points. However, the effects are temporary.

ChexSystems vs. credit bureaus

Most banks rely on ChexSystems instead of the major credit bureaus when reviewing checking account applications. ChexSystems is a consumer reporting agency that tracks your history with deposit accounts (checking and savings). The database records banking activity that may be important to financial institutions, such as:

• Unpaid overdraft fees
• Closed accounts with outstanding balances
• Returned checks
• Suspected fraud
• Accounts closed by your previous financial institution

If you have a negative ChexSystems report, the bank or credit union you are trying to open an account with may impose additional restrictions. However, it doesn’t directly affect your credit score.

What actually shows up on your credit report?

Your credit report contains information about how you’ve managed borrowed money over time. Here are items commonly found on a credit report:

• Credit cards
• Auto loans
• Student loans
• Mortgages
• Personal loans
• Payment history
• Collections accounts
• Hard credit inquiries

A standard checking account rarely shows up on your credit-related activity. The most common exception is when a bank runs a hard credit check during your application process. If you have unpaid overdraft fees or a negative checking account balance, the bank could send your account to collections. That would also hurt your credit score.

How checking account activity can indirectly affect your credit

While your everyday banking activity isn’t reported to the credit bureaus, some instances can indirectly affect your credit if you don’t handle them promptly. Unpaid debts are the main source of credit-related problems.

Some tips to keep your checking account in good standing and protect your score include:

• Paying overdrafts promptly
• Keeping enough money in your account
• Responding quickly to notices from your bank

As long as your bank does not send you to collections over an overdrawn account, the chances of your checking account negatively impacting your credit score are very low.

Overdrafts sent to collections

If you overdraw your checking account and don’t repay the negative balance, the bank will eventually close your account and send the unpaid debt to a collection agency.

Once a collection agency reports the account to the credit bureaus, it may appear on your credit report. Collection accounts can make it more difficult to qualify for loans or credit cards. These events will remain on your credit report for up to seven years.

Linked overdraft lines of credit

Some banks offer overdraft protection through a linked line of credit, such as a credit card with the same institution. A line of credit is a financial product that is included on your credit report. If you rack up a bunch of overdraft fees and they are charged to a line of credit, it can drive up your utilization rate, which will eventually hurt your score.

How to check what type of inquiry a bank will run

The easiest way to find out what type of inquiry a bank will run when opening a new account is to ask. Financial institutions will explain the process in their account disclosures, but talking directly to a representative is easier and quicker than reading through pages of disclosures.

Does opening a bank account affect credit? Final recap

Opening a new bank account rarely impacts your credit. Even if the institution runs a hard credit check, the impact on your score will be minimal. Use the information above to guide your decision-making process as you compare new checking account options and financial institutions.