Does Opening A Savings Account Affect Credit Score?

Definition of "Does opening a savings account affect credit score?"

Undeniably, many financial decisions revolve around receiving sufficient bank credit in the United States. For this reason, building and maintaining a good credit score is crucial. A high credit score opens doors to triple advantages, namely better loan terms, increased access to credit, and lower interest rates. How do savings accounts come into the picture? You might also wonder if opening a savings account can impact your overall credit score. Let’s discover the answers to these topical questions!

What is unique about credit scores in the US?

Credit scores in the US are regularly calculated considering your payment history, credit utilization, length of credit history, types of credit, and even recent credit inquiries. These factors help lenders assess your creditworthiness. In addition, they can determine the level of risk associated with extending credit.

Should you consider parking your money in a savings account?

Savings accounts are deposit accounts paying interest at a credit union or bank. Right off the bat, you must know that you can choose from many savings accounts in the US. On average, these savings accounts yield little interest. Still, their safety and reliability make them an excellent choice for storing funds for short-term needs. 

Unlike checking accounts, savings accounts may have some restrictions on how frequently you can withdraw funds (typically six times monthly). Still, they generally provide exceptional flexibility that comes in handy in the following situations. For example, you can save for buying a car, build an emergency fund, or go on vacation. Furthermore, you can open a health savings account to have your medical expenses in control. However, a high-yield savings account will bring you the most substantial ROI.

Is there a relationship between savings accounts and credit scores?

Unlike credit cards or (mortgage) loans, savings accounts are not directly linked to credit scores. Traditional savings accounts are considered deposit accounts. In other words, they don’t qualify as financial instruments for borrowing money. Thus, opening a savings account won’t affect your credit score directly.

Opening a savings account doesn’t imply making regular payments or debts. They don’t contribute to your payment history factor of a credit score. Consequently, maintaining a positive balance will not impact your credit score. 

How can savings accounts still have a positive impact on your financial situation?

Savings accounts can indirectly improve your financial stability and creditworthiness. A savings account reflects positively on your overall financial profile. In some cases, banks, credit unions, and other institutions will consider it an indicator of responsible money management. Thus, they will view you more favorably when assessing credit applications. Under such circumstances, a savings account can help you reach your goals.

By all means, the most lucrative savings accounts will provide a safety net if unexpected financial crises occur. Therefore, you can prevent missed payments on your existing debts, which would negatively impact your credit score.

You can build credit with secured savings accounts.

Suppose you’re an individual with limited or no credit history. In that case, secured savings accounts (or credit cards) can be a beneficial means for building credit. Getting a secured credit card requires an initial deposit, acting as collateral against the credit limit. These secure savings accounts are ideal for individuals with lower credit scores or those entirely new to credit.

Final thoughts

Opening a savings account in the States doesn’t influence your credit score directly. Still, maintaining a savings account can indirectly be highly beneficial for you. The most notable perk is boosting your creditworthiness. A savings account will prove responsible money management on your behalf. Plus, it provides a safety net for unexpected expenses. Thus, your credit score won’t take a direct hit.

You can also consider alternative credit-building tools, such as secured credit cards, to lay the foundations of or improve your credit history. Being responsible with your finances is crucial! Thus, make your payments on time and keep your credit utilization low!

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.


Popular Real Estate Questions

Popular Real Estate Glossary Terms

A binding arbitration is a way to solve disputes without going to court. An alternative to the more expensive and lengthy legal procedures, a binding arbitration is basically the process ...

Court order granted in favor of the landlord to remove a tenant from the property because of nonpayment of rent and/or damaging the property. The writ directs an officer of the law to ...

A method widely used for evaluating real estate projects. Under the net present value method, the present value (PV) of all cash inflows from the project is compared against the initial ...

A legally transferable debt instrument by which the issuer agrees to pay the payee within a certain time period. Note usually pay a specified rate of interest tied to the market rate of ...

If you are a real estate investor and you come across this term, you might wind up wondering … What is the operating expense ratio? The operating expense ratio (OER) is a way for ...

An idiomatic expression indicating the desire of an individual to understand new surroundings and all of its nuances including its quality and character. The derivation of the expression ...

Large, high-volume food store where customers serve themselves by going through the aisles and selecting their groceries to be paid at the cash register on the way out. ...

Funds that are retained in an account until a certain event occurs. For example, a downpayment on a contract held until full payment is received whereupon the holding funds are credited to ...

Legal right or privilege, such as that arising from a contract, to use land owned by another person or business for a specific purpose. The use should be reasonable for the circumstances. ...