Updated: Feb 08, 2024

How Your Checking Account Can Impact Your Credit Score

Your checking account impacts your credit score. The relationship between your checking account and credit score is one you should be familiar with.
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Most people consider their checking account the central hub of their personal finances, and many financial transactions involve checking accounts in one way or another. Typically, a person’s money flow begins when their paycheck is deposited into a checking account. From there, some of it might go to a savings account or other fund, while the rest goes toward paying rent, credit card bills, utilities, and other expenses.

Despite the importance of checking accounts, some people remain confused as to how checking accounts can affect their credit. While a checking account does not represent a line of credit and isn't recorded in your personal credit reports, a checking account can negatively affect your credit score. Because of that, it’s important to keep your checking accounts in good standing.

Choose your bank carefully to avoid 'hard pull' penalty

A checking account isn't a credit account, but certain banks will perform a 'hard pull' on your credit report when you try to open a new checking account. Banks have been known to turn down potential customers due to discrepancies on their credit reports.

Your credit report can be accessed by companies using either a 'soft pull' or 'hard pull.’

Typically, 'soft pulls' are inquiries on your credit report not initiated by you - such as the pulls credit card companies perform that result in pre-approved credit card offers in the mail.

A 'hard pull' is a voluntary credit check initiated by you, often in the process of applying for a mortgage, credit card, or mobile phone contract. A 'soft pull' doesn't hurt your credit score but a 'hard pull' will drop your credit score slightly.

You probably guessed it: Depending on the bank, opening a savings or checking account could result in a 'hard pull.'

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Stay up to date, don't overdraft

If your checking account ends up with a negative balance, it means you actually owe money to the bank. A negative balance is often the result of two things: account maintenance fees and overdrafts.

For checking customers with monthly account maintenance fees, keeping the account idle without checking its balance is not a good idea. Also, writing a check or making a debit card purchase for an amount that exceeds your checking account balance results in an overdraft — followed by an overdraft fee. Once the fees deplete your funds, it’s easy to enter negative balance territory.

If you don't bring the balance back up to $0 or more in a timely manner, your bank may send your account to a collections agency. When something like that ends up on your credit report, your credit score will suffer much more than it would from a 'hard pull.’ Unfortunately, scenarios like that happen to many banking customers everyday.

How to protect your credit score

The 'hard pull' on your credit report is often unavoidable since it is often the bank's policy for new customers seeking a checking account. But be sure to ask the bank representative whether or not the bank conducts 'hard pulls' before signing any paperwork. If you don't want to do any harm to your credit score, shopping around for a different bank might be a good idea.

Once you open a checking account, be sure to take an active approach when it comes to maintaining your balance. Sign up for account alerts via E-mail or text messages, and regularly access your account information Online. If you ever do end up with a negative balance, refill your account as soon as possible.

Due to new financial regulations, checking customers have a choice of whether or not to sign up for an overdraft protection program. If you are worried about negatively impacting your credit by overdrafting your checking account, be sure to opt into an overdraft protection program. The usually small fee for the program could repay itself several times over if you accidentally come close to exhausting your funds.