If you’re thinking about opening a new checking account, you might have some questions. We’re here to help you understand when and how a checking account can affect your credit score and how to make sure that impact is a positive one.
What's the difference between a soft & hard credit pull?
First, let’s explore how soft and hard credit pulls impact your credit differently. Soft credit pulls do not affect your credit score. These are commonly used for pre-approvals or when you check your own credit. In contrast, a hard credit pull can affect your credit score and will show as an inquiry on your credit report. These require your permission and are typically used for loans or lines of credit.
Does opening a checking account affect credit score?
While there are a few exceptions, opening a checking account will typically have little impact on your credit score. While most financial institutions will check your credit or use a special program to view your credit history when you open a checking account, the impact on your credit will usually be minimal.
When could opening a checking account affect credit score?
Opening a checking account could affect your credit score more noticeably when you sign up to include overdraft protection on your account. Overdraft protection is a line of credit that is meant to provide you with something of a safety net in case your account goes negative. Because this is a line of credit, financial institutions will require a hard inquiry on your credit before approving you for overdraft protection and will report on your overdraft to the credit bureaus.
When could having a checking account affect credit score?
A checking account could affect your credit score in a couple of ways, particularly if you have overdraft protection. If you overdraw from your account too often or keeping a negative balance in your account can result in your financial institution reporting this to the credit bureaus or even closing your account. On the other hand, if you do pay off and use your overdraft protection wisely, that will report positively to the bureaus can can help improve your credit.
Will closing a checking account impact credit?
Closing a checking account normally won’t impact your credit, however there are some things to be aware of before you close your account. You’ll need to review your account to ensure you have no outstanding fees, automatic payments, or pending checks as these may bounce and result in fees that you will be responsible for. These can impact your ability to open future checking accounts, especially if the financial institution does report this to the credit bureaus.
Opening a new checking account can be a great step towards managing your finances better. Now that you understand how a checking account can affect your credit, you can make informed choices when choosing and opening your account. Don’t forget to consider rewards checking options that can also help you make the most of your checking.
