Does Opening a Bank Account Affect Your Credit Score?

If you’ve recently applied for a credit card or another financial product, you may have noticed a small dip in your credit score. While this is normal for new lines of credit, you might be wondering if opening a bank account affects your credit score in the same way.

In this blog, we’ll answer that question and provide more context to help you understand the impact bank accounts can have on your credit score. We have a lot to cover, so let’s get to it!

Does Opening a Savings Account Affect Your Credit?

In most cases, opening a savings account won’t affect your credit score. This is because most banks only run a soft credit check, which isn’t recorded by credit reference agencies and therefore doesn’t impact your credit score. Only in rare cases will a bank pull a hard credit inquiry, which will have a small impact on your credit score.

Fortunately, unless you’re having numerous hard credit inquiries pulled in a short period of time, the impact to your credit score will usually be small and brief. 

Does Opening a Current Account Affect Your Credit?

In most cases, opening a current account to manage daily expenses and direct debits won’t hurt your credit score. Like with a savings account, there’s a chance your bank will run a hard credit check, which can impact your credit score, but it’s similarly uncommon.

If you’re worried about whether opening a new account will hurt your credit score, ask the bank what type of credit inquiry they will perform before you submit an application.

Will Opening New Credit Accounts Impact My Credit Score?

Credit cards are an essential tool for building credit, and you may be opening a bank account in order to apply for a credit card. If you do open a new credit card, you’ll most likely see your credit score decrease slightly from the hard check the bank pulls, although that impact is typically short-lived. However, opening a new line of credit with your bank can impact your credit score in other ways that you should be aware of, including but not limited to:

• Changing your credit utilisation ratio
• Diversifying the types of credit you have in your name
• Building your credit history

Aside from the initial impact of a hard credit check, how you use a line of credit and manage your payments will determine whether it has a positive or negative impact on your credit score.

Related Read: How to Use a Credit Card Wisely

Other Ways Bank Accounts Can Affect Your Credit Score

Of course, you don’t just open a bank account for the sake of opening it; you open it to use it. So how else can bank accounts impact your credit score after you’ve opened them? Let’s take a look at some common ways your credit can be impacted by your bank account.

Overdrawn Bank Accounts Can Impact Your Credit Utilisation Rate

While savings and current account information isn’t included on a credit report, overdrafts are. This is because an overdraft is a line of credit. If your current account is regularly overdrawn, it will have an impact on your credit utilisation rate—the amount of your total available credit that you’re using. 

A frequently-overdrawn account can signal to credit reference agencies and lenders that you’re dependent on credit, which can damage your credit score and make lenders hesitant to approve you for new lending products.

Related read: Understanding Credit Utilisation

How Closing Bank Accounts Affects Your Credit Score

In most cases, closing a bank account has no impact on your credit score. However, there are ways closing a bank account can damage your credit score if you’re not careful.

If you close an overdrawn bank account, you technically have an unpaid line of credit with that bank. Overdrafts typically have short repayment timelines, and if you don’t pay it promptly, your debt could be sent to a collection agency which will leave a negative mark on your credit score. 

Additionally, if you have an old credit card tied to a bank account, closing the card and the account could potentially damage your credit score. Even if you don’t use the credit card, it may contribute to your credit score by demonstrating a lengthy credit history and keeping your credit utilisation rate low. Closing the card and account will lead to those positive indicators eventually being removed from your credit report.

Pave is Here for Your Credit-Building Journey

To improve your credit score, it’s essential to understand what will impact it. But untangling the world of credit can be confusing, and building credit is no easy task. That’s why we made the Pave app.

Pave’s bills monitoring connects to your bank accounts, and can remind you when payments are coming up and if you have the money to cover them. It’s just one of the ways Pave helps you stay on top of your credit. Combined with personalised credit fixes and active credit building, Pave is an excellent tool for building healthy credit. 

To see for yourself why hundreds of thousands of Brits have turned to Pave for help building their credit, download Pave from the App Store or Google Play today.