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.
Does joining bank accounts affect credit score? ›
Checking accounts, including joint accounts, are not part of your credit history, so they do not impact credit scores. Your credit report only includes information about your debts, and accounts have the same effect on your credit whether you are associated with the account as an individual or as a joint owner.
Do bank account applications affect credit score? ›
Opening a bank account will not affect your credit score unless the bank conducts a hard credit check which is typically reserved for bank accounts that provide overdrafts. You're keen to open a new bank account but pause, worrying it might dent your credit score.
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.
Should I close unused bank accounts? ›
Accounts that have been open for a long time may have a positive impact on your credit score so if you decide to close some accounts to help your credit score, start by looking at inactive accounts that you no longer use. The general guidance is that you should aim to have fewer, well-managed credit accounts.
What do banks see as a good credit score? ›
Experian
| Excellent | Very good | Good |
|---|
| Excellent 961 - 999 | Very good 881 - 960 | Good 721 - 880 |
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.
Which bank account does not show on a credit report? ›
Your savings account balance does not appear on a credit report. Anyone checking your report cannot tell how much money you've deposited, withdrawn, or currently have in your account. Therefore, putting money in or taking funds out of a savings account does not influence your credit score.
Is it safe to link bank account to credit score? ›
Linking your bank account to ClearScore is a secure and easy way to verify your identity. It won't affect your credit score and you can unlink it at any time.
As a hard credit check will impact your score for some time, if you plan on taking out a loan in the next year, you might want to avoid switching bank accounts. This is especially true if you've had hard checks on your account for other things, such as applying for a credit card.
Is a 900 credit score possible? ›
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
Why is my credit score so low when I have no debt? ›
Various weighted factors mean that even with no credit, your credit score could still be low because the length of your credit history or credit mix, for example, could also be low.
Why did my credit score drop 100 points after opening a credit card? ›
When you open a new credit account, it lowers the overall age of your credit. In addition to the age of credit, opening up any new credit account generally requires a hard inquiry, which could ding your credit score a few points temporarily. After about two years, the inquiry should drop off.
Does canceling a credit card hurt your credit? ›
Credit experts advise against closing credit cards, even when you're not using them, for good reason. “Canceling a credit card has the potential to reduce your score, not increase it,” says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report.
Should I pay off my credit card in full or leave a small balance? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Does your bank account show up on your credit report? ›
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.
Is having more bank account hurt your credit? ›
No, having multiple savings accounts doesn't directly affect your credit score.
Do bank accounts show up on background checks? ›
Your employer can see your credit history but not your bank accounts on their employer credit check. If there are special circ*mstances in which you want the employer to have access to your information, you will have to give permission in writing for them to have access.
