The answer is sometimes. Most banks have a simple application process, and some take it a step further by evaluating your creditworthiness. Depending on the bank, if your credit score isn’t up to par, they may deny you for a checking account. Show
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How to know if a bank checks credit scoreBefore submitting an application, reach out to confirm if the bank conducts credit checks for new account applicants. If so, they will initiate a hard inquiry, which could impact your credit score between 2 and 5 points. This pull could remain on your credit report for 2 years. If credit checks aren’t a standard part of the process, your credit score won’t be impacted. However, you can expect the bank to conduct a soft inquiry. You can often open a new account without undergoing a credit check, especially if you have an existing relationship with the bank. Many banks also evaluate your banking history through ChexSystems or Early Warning Services. They’re both consumer-reporting agencies that shed light on historical banking data from the last 5 years. If you’ve incurred several overdraft fees in the past or had accounts closed in the past because of negative balances, the bank will be able to see this, and your application could be denied. Why do banks check your credit?Financial institutions need assurance that account holders will handle their accounts responsibly. If you’ve struggled to manage debt obligations in the past, there’s a greater chance that you’ll have trouble staying on top of your checking account. This means the risk of overdrawing your account and incurring steep fees is higher. The overdraft protection offered by banks is another pertinent reason to conduct credit checks. If the bank extends this protection to you as a courtesy, it will cover a transaction if it’s presented to your account and you don’t have the funds. This practice can become problematic and costly if you don’t deposit or transfer the money promptly to make your account balance positive. So, the bank wants to make sure you won’t be a high-risk account holder that abandons your account if it goes negative. What if you apply for a credit card?When you apply for a checking account, the bank may invite you to apply for a credit card. If you decide to move forward, expect a hard pull to your credit. What to do if you’re denied a bank accountIf your application for a new checking account is denied, you have options. Consider a second-chance bank account to re-establish positive banking history if that’s the reason for the denial. In the meantime, retrieve a copy of your ChexSystems report and review the contents to ensure they’re accurate. File disputes to rectify any issues. Try RoarMoneyIf you have been denied access to a bank account due to a credit problem or are worried about taking a small hit to your credit, RoarMoney from MoneyLion might be for you. You only need a few pieces of information to open an account, and there’s no credit check.
After signing up, your RoarMoney benefits will be available to you instantly, including a virtual debit card, getting paid up to 2 days early with direct deposit, tracking your spending, and much more. You can learn more about RoarMoney here. Opening a bank account doesn’t have to be complicatedWith MoneyLion, opening an account takes less than 5 minutes and can be done all from your mobile phone. Start enjoying the benefits for RoarMoney right away with your virtual debit card, Financial Heartbeat, exclusive savings, price protection and more! Allison Martin Allison is a veteran writer in the personal finance space. She has covered topics from small business growth, investing, family finances and everything in between. You can see her work here at MoneyLion as well as Investopedia, The Wall Street Journal, Yahoo! Finance and ABC News to name a few. This device is too smallIf you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience. Skip to main contentEditorial Disclosure We have not reviewed all available products or offers. Compensation may impact the order of which offers appear on page, but our editorial opinions and ratings are not influenced by compensation.
Image source: Getty Images Need a new bank account? Here's what to expect as far as your credit score goes. Key points
It's important to do your best to keep your credit score in good shape. The higher that number, the more likely you'll be to get approved the next time you want to take out a loan or open a new credit card. And if you have a strong credit score, you might qualify for a lower interest rate on a personal loan or mortgage. Often, applying for a new loan or credit card will actually cause your score to take a small hit. When you ask to borrow money in any capacity, the lender or credit card company at hand will need to verify you're not too much of a risk. To do so, it will perform a hard inquiry on your credit report, which can cause your score to drop anywhere from five to 10 points on average. But what if you're applying for a new bank account? Will that have a similar impact? For the most part, a bank account application will not result in a hard inquiry on your credit report. You shouldn't worry about damaging your credit even modestly as you look for a place for your money. Hard inquiries vs. soft inquiriesWhen you open a bank account, you're not asking to borrow money. Rather, you're simply asking for a place to keep the money you already have or expect to gain in the future. As such, banks typically do not perform a hard inquiry on your credit report when you apply for an account (though in some rare cases, they might). Rather, banks perform what's known as a soft inquiry. The benefit of a soft inquiry is that it shouldn't cause any credit score damage. That's important, because if your credit score isn't in the best of shape, sometimes, even a modest drop could cause issues. Imagine you want to apply for a conventional mortgage. You'll need a minimum credit score of 620 to go that route (though some lenders may require a higher credit score). If your score is 624, you may not be able to afford a five-point hit before submitting that mortgage application. But thankfully, opening a new bank account shouldn't change your credit score at all. Can your bank account activity affect your credit?Generally, applying for and opening a new bank account won't have an impact on your credit score. But if you don't manage your account well, it could affect your credit. If you overdraw your account but don't pay the overdraft fees you're liable for, that could hurt your credit. So could closing out a bank account with a negative balance. However, having a small amount of money in your bank account won't cause your credit score to drop. A higher credit score could open the door to affordable borrowing options, so it's important to do your best to keep your score in good shape. That includes knowing what factors will impact that number. Generally speaking, you can open a new bank account without having to worry about any sort of credit score–related backlash. These savings accounts are FDIC insured and could earn you up to 18x your bankMany people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 18x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2022. About the AuthorMaurie Backman writes about current events affecting small businesses for The Ascent and The Motley Fool. Featured Articles |
Does opening a new bank account affect my credit score
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