Your bank account information doesn't show up on your credit report, nor does it impact your credit score. Yet lenders use information about your checking, savings and assets to determine whether you have the capacity to take on more debt.
When applying for loans and/or credit cards, lenders first look at your credit score and credit report to see your open and closed credit accounts and loans, as well as details about your payment history. From this, they can also tell how much available credit you have, how much you're using, if you've had anydebtgo to collections and the number of soft or hard inquirieson your account within the past two years.
But the credit report leaves out some important data: 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.
This is where your bank statements come into play.
Below, Selectexplains why getting your bank account information in order can help you the next time you apply for credit.
Why lenders might ask for more information
Banks and lenders look at everything from your car loan to your mortgagewhen you apply for new creditbecause they need to assess your capacity to pay your bills.
While this is standard with mortgage lending, auto lending and sometimes even personal loans, it might also come up when you apply for a new credit card. Because of the high unemployment rate and general economic uncertainty, card issuers are tightening requirements on credit card approvals and looking at your income documentation as well as your credit score to see if you qualify.
What information lenders will ask for
When applying for a loan, a mortgage or a credit card, lenders will ask foryour salary and incomebecause these metrics measure how much money you have, or your capacity to make monthly payments. They may want to see proof such as recent pay stubs, tax returns, W-2 forms, direct deposit and/or bank statements.
For a sizable loan like a home mortgage or business loan, lenders will take a closer look at a borrower's assets. These assets can include your cash, such as your checking accounts, savings accounts and CDs. They can also include investment assets, like your retirement accounts, stocks and bonds. Properties and material assets might also be taken into consideration, and you'll need to show documentation of the appraised valueif you're planning to use them as collateral.
How lenders assess what a good candidate is
A lender or card issuer will assess how reliable you are as a potential borrower by looking atthe overall picture: your credit history, your credit score, your income and your various cash and investment assets. A low debt-to-income ratio and a history of steady paychecks will help your case in getting approved for new credit because they demonstrate both your capacity to take on debt and the likelihood that you will repay it. Lenders look for expenses like monthly housing payments and the total of your minimum payments across all accounts to get an idea of how much you owe every month, versus what you bring in.
If you are looking to apply for a credit card but unsure how your income stacks up, consider a secured credit card. Those with less-than-stellar credit and inconsistent income could have a better chance of qualifying for these cards because they have more flexible income requirements. With a secured card, you put down a refundable deposit upfront, which acts as your credit limit, and youbuild your credit scoreby paying your balances off on time and in full.
Some of Select's top picks for secured credit cards are below.
Bottom line
When it comes to applying for new credit, your credit history and credit score are definitely important but they make up just one factor of your application.
To show lenders that you have the ability to repay your debt, be prepared when you apply for a new loan or credit card. Have these financial resources ready to go and know your credit score going in. Doing so canopen access to credit and put you on a path to a healthy financial future.
Don't miss:7 common fees of checking accounts and how to avoid them
Information about thePlatinum Secured Mastercard®,DCU Visa® Platinum Secured Credit Card, and SDFCU Savings Secured Visa Platinum Cardhas been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
Your bank account information doesn't show up on your credit report, nor does it impact your credit score. Yet lenders use information about your checking, savings and assets to determine whether you have the capacity to take on more debt.
Does a bank account affect credit score? ›
Your checking account usually has no impact on your credit score. Normal day-to-day use of your checking account, such as making deposits, writing checks, withdrawing funds, or transferring money to other accounts, does not appear on your credit report.
Do bank account applications affect credit score? ›
If possible, you should avoid or minimise these to keep your score as high as possible: Frequently setting up new accounts. Opening a new bank account should only lower your credit score temporarily – but if you do it too often, your score won't have time to recover. Being close to your credit limit.
Does joining bank accounts affect credit score? ›
Checking account balances don't appear on your credit report and checking accounts don't directly factor into calculating your credit score. However, if problems managing your joint checking account cause missed credit card or loan payments, or credit card overuse, those issues will affect your credit.
Do credit accounts affect credit score? ›
Credit cards can help or hurt your credit score depending on how you use them. Paying your credit card bills on time each month is the best way to build a strong credit score. Paying late or missing a payment can lower your score. It's also important not to owe too much on your cards at any given time.
Does a bank credit check affect credit score? ›
While hard credit checks can decrease your credit score, the impact is only temporary and generally minimal, as inquiries only account for 10% of your score. It's important to understand the difference between hard and soft inquiries, and to avoid multiple hard inquiries within a short period of time.
Can the bank give me my credit score? ›
Your bank or credit union.
Some banks and credit unions offer credit scores free for customers through online banking sites and/or mobile apps. However, the credit score a bank or credit union shows its customers may not be the same score the bank or credit union uses to make lending or other decisions.
Is credit score based on bank account? ›
Your bank accounts don't affect your credit score, but they still play a vital role in getting credit.
What affects your credit score the most? ›
Most important: Payment history
Your payment history is one of the most important credit scoring factors and can have the biggest impact on your scores. Having a long history of on-time payments is best for your credit scores, while missing a payment could hurt them.
What bank accounts don't show up on credit report? ›
Financial Information That's Not Related to Debt
Loan and credit card accounts will show up, but savings or checking account balances, investments or records of purchase transactions will not.
A joint credit card works just like a traditional credit card, except the account is shared by two people, with both individuals considered a primary cardholder. Each cardholder gets their own card that's linked to the account, and both are responsible for paying off the balance.
Should I have a joint account with my wife? ›
After all, pooling one's resources seems to make a marriage happier and more stable—something most couples want when they first say “I do.” “Couples do seem to be happier when they have a joint account, at least for those first two years of marriage—and possibly later, too,” says Olson.
Can you still withdraw money from a joint account if one person dies? ›
Joint bank accounts
Couples may also have joint bank or building society accounts. If one dies, all the money will go to the surviving partner without the need for probate or letters of administration. The bank may need the see the death certificate in order to transfer the money to the other joint owner.
Do banks affect your credit score? ›
Most of the time, opening a checking account does not affect your credit score. If the bank pulls your credit before opening your account, it will likely make a soft inquiry. The bank could make a hard inquiry, which would lower your score slightly, but that's unusual.
Does having more bank accounts affect credit score? ›
Will having two or more current accounts damage my credit score? Not necessarily, no. However, having two or more current accounts won't necessarily damage your credit score, but it could have a negative impact if you start dipping into multiple overdrafts – making it look as if your finances are becoming stretched.
What type of accounts affect credit score? ›
The ability to successfully manage multiple debts and different credit types tends to benefit your credit scores. Credit scoring systems favor a mixture of installment debt (such as student loans, mortgages, car loans and personal loans) and revolving accounts (credit cards and lines of credit).
Can lenders see all your bank accounts? ›
Yes. A mortgage lender will look at any depository accounts on your bank statements — including checking and savings accounts, as well as any open lines of credit. Why would an underwriter deny a loan? There are plenty of reasons underwriters might deny a home purchase loan.
Does it hurt your credit to close a bank account? ›
When closing a bank account, a common question people ask is whether it will negatively impact their credit scores. Fortunately, closing a savings or checking account that's in good standing won't hurt your credit in any way.
Should I close a bank account I don't use? ›
It's generally not a great idea to let bank accounts sit inactive. For one, banks can charge recurring fees when accounts don't meet certain ongoing requirements, such as a minimum number of monthly transactions.
