Does Opening a Checking Account Affect Credit Score?

Your credit scores are an integral part of your financial status that influences your creditworthiness and borrowing limit. Having a high credit score typically means you can borrow more. If you have a low credit score, you’ll generally have limited borrowing options.

If you wonder whether opening a checking account can affect your credit score, checking accounts usually have a minor impact.

However, if a bank pulls your credit and makes a hard inquiry when opening a checking account, it can affect your credit score. Your credit score may also be impacted when you sign up for overdraft protection, or when you overdraw your checking account without replenishing it.

This guide provides more details about how a checking account can impact your credit score.

How do checking accounts affect your credit score?

To make lending decisions, lenders use various types of credit scores. Below is a comprehensive overview of how opening a checking account can affect your credit score. Let’s get started!

1. Making a Hard Credit Inquiry

Occasionally, when applying for a checking account, a bank or credit union will run a credit check, though it’s not common. It’s just one way that your bank or credit union can choose to evaluate your financial history.

According to Experian, “information about assets such as checking account balances, savings account balances, certificates of deposit, individual retirement accounts, stocks, bonds or other investments” are not listed in your credit profile.

When looking at your credit report, a bank can make a soft inquiry or a hard inquiry. A soft inquiry doesn’t affect your credit score because it’s not tied to a potential loan or line of credit.

However, a hard inquiry can impact your credit score. A hard credit inquiry, also known as a hard pull, occurs when a bank checks your credit report before approving your request for a checking account. During the process, your bank assesses things like your payment history and debt to income ratio.

Each time a credit issuer pulls your credit report, your credit score can drop between one and five points. This drop is relatively insignificant in the bigger picture, but still worth noting.

However, if you have a high frequency of hard inquiries occurring within a short time, your credit score drops significantly. To make matters worse, hard inquiries stay on your credit report for two years. This could potentially affect your ability to borrow money or open a checking account if lenders and financial institutions consider you a high-risk client.

So, what’s the bottom line? In reality, credit inquiries have little effect on your credit score. A problem arises when you have too many of them. So, it’s best to limit the amount of credit you apply for.

2. Signing Up for Overdraft Protection

Overdraft protection helps in many ways, including clearing checks and other financial transactions when your account has limited funds. It’s convenient and helps you avoid missing payments or returned checks.

However, overdraft protection may trigger a hard inquiry because it’s considered a line of credit. Your bank may want to look at your credit report before approving your request for the feature.

As we’ve already discussed, your credit score drops between one and five points every time someone makes a hard inquiry to assess your credit report. You can avoid this by skipping the overdraft protection option when opening a checking account.

3. Overdrawing Your Checking Account

Overdrawing your checking account may affect your credit score. It can also affect your credit score if you don’t pay overdraft fees, or fail to replenish a negative balance.

Many banks work with debt collection agencies to collect unpaid overdraft fees. Debt collection agencies, in turn, can report your details to credit bureaus if you fail to pay your debts. If you have collection accounts reported to the three major credit bureaus, Equifax, Experian, and TransUnion, it will negatively impact your credit score.

Do banks run credit checks for checking accounts?

Your credit score likely won’t affect your ability to open a new checking account. Banks and credit unions rarely pull your credit when opening a checking account. If they do, they primarily check your credit report, but this doesn’t affect approval.

What else do banks look at?

After learning that credit scores aren’t a significant factor in checking account approval, you’re probably wondering what is.

ChexSystems is a consumer reporting agency that tracks your banking history. Most financial institutions look at your ChexSystems report to see how you’ve managed past bank accounts.

If you’re in ChexSystems, you won’t be able to open checking or savings accounts at most banks and credit unions. However, you can still open bank accounts at a bank that doesn’t use ChexSystems or at a second chance bank.

A bank may also want to ensure you meet the following requirements when opening a checking account.

  • Be of legal age—18 years and over, or share an account with a legal guardian.
  • Have a Social Security card.
  • Have a U.S.-based home address.

However, you should always keep an eye on your credit score. Even though it doesn’t affect your ability to open a checking account, it is an excellent indicator of your financial health. Plus, you always want to know where you stand with creditors.

Things That Affect Your Credit Score More Significantly Than a Checking Account

There are other factors that impact your credit score more than opening a new checking account.

Payment History

Late payments hurt your credit score, and it gets worse if you have a lot of them. Creditors examine your payment history more than anything else when assessing your creditworthiness. This helps them determine whether you can repay the debt on time.

As a result, you should have minimal or no late payments to protect your credit history. According to an Experian report, late payments account for 35% of the FICO score—the credit score used by 90% of lenders.

Credit Utilization Ratio

Your credit utilization ratio is responsible for 30% of your FICO score, making it the second most influential aspect of your credit scores. Your credit utilization ratio is the percentage of your revolving credit limit used compared to the total limit.

Lenders use the ratio to assess how much of your credit limit is used by you at any given time. As a rule of thumb, you want to avoid using more than 30% of your credit limit because it lowers your FICO score. But, that doesn’t mean it’s always the right thing to do. Having an even lower credit utilization ratio can help boost your credit scores.

Length of Credit History

Length of credit history accounts for 15% of your FICO score. If you don’t know what credit history length is, it’s how long you’ve had a credit account.

The ages of your oldest credit account, the newest account, and the average of all your credit accounts come into play when determining the score. You want to have a more extended credit history for a high credit score because it makes you more creditworthy.

Bottom Line

Credit scores are mostly affected by factors like late payments, credit utilization ratios, and length of credit history. They’re typically not influenced by opening a checking account. However, watch out for the effects of overdraft protection and overdrawing your checking account on your credit score.

Samantha Hawrylack
Meet the author

Samantha Hawrylack is a personal finance expert with a passion for writing and SEO who has been featured in publications like Grow, MSN, CNBC, Clever Girl Finance, Credit Donkey, and more. She writes about various personal finance topics including credit, loans, real estate, investing, and more.