Will Opening A Savings Account Affect My Credit Score?

When it comes to your credit score, we all know how important it is to have positive credit. Not only is this good because it means you are not going to be in debt, but it also means that you have more monetary opportunities, especially when it comes to a mortgage or a loan. 

If you have a credit score that is fairly low, your chances of being accepted to borrow money is either non-existent, or very limited. This is why so many people are concerned about their credit score, and what can potentially affect it.

Will opening a savings account affect my credit score?

When thinking about a savings account, it is only natural to wonder whether this can affect your credit score. After all, there are many things associated with money that can affect your credit score.

In this article, we will be delving into if opening a savings account will affect your credit score, and the reasons why this might potentially happen.

Will opening a savings account affect my credit score?

You will be pleased and reassured to know that in the vast majority of cases, opening a savings account will not affect your credit score.

In fact, in the vast majority of cases, having a savings account is actually a positive thing, because it proves that you can manage your money, and put money aside each month, instead of spending it. 

When it comes to your credit score, savings accounts are not typically taken into consideration. This is because, in the vast majority of cases, only a soft credit check is run by lenders.

However, if a hard credit check is run, this is when your savings account could potentially be taken into consideration regarding your credit score.

To understand this more clearly, it is useful to have a clear understanding of the differences between a hard and soft credit check. 

As we have already covered, lenders, which include banks, financial institutions, and credit unions will typically carry out a soft credit check.

This means that they do not look into your financial information in great detail. Rather, they carry out a surface check to ensure that you are eligible to have an account with them.

What is great about soft credit checks is that they do not have a negative impact on your credit score. These checks are not noted, and will make no difference to your score, which is great.

As a result of this, when you are opening a savings account, in the vast majority of cases, your credit score will remain the same.

However, the same cannot be said for a hard credit check. These checks are more serious, and are in a lot of detail in comparison to a soft check.

The potential lender looks further into your financial history, to see whether you are reliable at paying back your repayments, and are a suitable candidate. 

As a hard check does look into your credit history in a lot of detail, this does mean that your credit score will be affected.

While it typically only affects it slightly, it will still decrease your overall score by around 10 points at the most. In addition to this, the hard credit check will remain on your credit score history for up to two years.

Ideally, you will want as few hard credit checks as possible. This is because the more you have, the lower your credit score will be and the less likely you will be to be accepted for things such as a loan.

It is worth noting that while they will stay on your records for two years, after a few months, they are not as much of a problem if they are only carried out occasionally. 

To summarize, when you are looking to open a savings account, we would always recommend asking the provider what type of credit check they are going to carry out.

Ideally, you will only want to choose one that will carry out a soft credit, rather than a hard check. This will help to prevent anything negative happening to your credit score or credit history.

Is It Bad To Open A Savings Account?

No, as we have already covered, opening a savings account is not a bad thing. If anything, it proves that you are capable of managing your money well, and have enough money left over each month to save.

Savings accounts are useful, because they allow you to separate your spending and saving money. They make saving easier as you know that the money is not to spend every day. 

In addition to this, given that it is separate from your current account, it is more difficult to access and spend the money. This makes touching the money in the savings account slightly more difficult, which is a good deterrent if you need to save money and are worried about dipping into it. 

Some savings accounts will also add interest to your money each year if you do not take the money out, which is another great reason to have a savings account. 

While they are not completely necessary, they are certainly something to consider. Where possible, you should always have some savings and money to fall back on.

This will help to cover the costs of anything that is unexpected, and will not force you to go into overdraft, or need to borrow money, as you will already have the money saved up. 

Summary

We hope that you have found this article both interesting and reassuring. As you can see, in the vast majority of cases, there is no need to worry about a savings account affecting your credit score. In fact, it can have a positive effect on your score over time. 

While most banks will carry out a soft credit check, you will want to receive reassurance of this before opening an account. This is because hard checks will have an impact on your credit score. But, these are very rare to occur when opening a savings account. 

Total
0
Shares
Previous Post

Should I Switch To A Credit Union?

Next Post

Is Unemployment Public Record?

Related Posts