Does Opening a Savings Account Affect My Credit Score?Here's how a savings account can boost your financial health and prepare you for an emergency.
If you’re in the process of building or repairing your credit, you might be looking for ways to build a positive credit history and boost your credit score. One concern among individuals looking to repair their credit is whether opening a savings account will affect their credit score. The simple answer is no, opening a savings account won’t immediately or directly affect your credit score.
This concern can arise because some bank account activity can reflect negatively on your credit history or make it more difficult to get a checking account. For example, incurring numerous overdrafts or otherwise mismanaging your checking account can result in you being added to a consumer reporting agency database such as ChexSystems.
Although opening a savings account at a local bank or credit union or even opening an online savings account won’t affect your credit, having and keeping a savings account can indirectly benefit your credit score in two ways: by serving as an asset and by safeguarding you from financial situations that could harm your credit. Learn more about what opening a savings account can mean for your credit.
Lenders See a Savings Account as a Sign of Stability
Your bank accounts and investment accounts aren’t listed on your credit report, but if you apply for a car loan, a real estate mortgage, or even a credit card or educational loan, the banker is likely to ask that you list these accounts on your application. Having a savings account demonstrates to lenders that you have financial stability and might be a good credit risk. Having credit accounts can improve your credit score as long as you use them responsibly, pay your bills on time and maintain low balances.
Related: How Do Banks Decide My Personal Loan Eligibility?
Finance 101: Savings Can Protect You From Financial Trouble
When you maintain an emergency fund, you can protect yourself against financial hardship in the event you lose your job or face unforeseen expenses such as medical or car repair bills. Without savings set aside to cover your housing payment or everyday expenses, you might fall behind on your rent or mortgage, your auto loan, or your credit card bill. Failing to pay your bills and defaulting on credit accounts can quickly and significantly impact your credit score and lead to even worse consequences, such as eviction or foreclosure, repossession, and bankruptcy.
Check Out: 10 Best Savings Account Promotions Available Now
The decision to open a savings account that is separate from your retirement accounts and checking accounts marks a great starting point for a better financial future. Regular contributions will add up over time, even when interest rates are low. A non-retirement savings account lets you earmark funds for emergencies and future expenses while keeping retirement funds and other money separately allocated.