If you’ve struggled with poor credit history in the past, or if you’re curious about when credit checks may be performed, you may want to know if opening a savings account will impact your credit score.
The good news is that opening a savings account will not hurt your credit score, and nor would opening a bank account. If anything, opening a savings account and using it responsibly may boost your credit score - especially if you can demonstrate strong financial discipline.
There are a variety of financial decisions you can make that may result in a credit check and may also affect your credit score. If you’re considering opening a savings account, it’s worth exploring how this action may influence your creditworthiness.
What can affect your credit score?
Your credit history and credit score are based on several factors, most significantly being access to credit, credit applications and your repayment history with said credit products – both good and bad.
While we don’t know exactly how much the following may impact your credit score, we do know that these various factors may significantly affect it:
- Paying your bills on time
- Growing consistent savings
- Making multiple credit applications
- Maxing out a credit card
- Being 14 days overdue on bills
- Closing a credit card
Nowadays, banks and lenders don’t just report on negative events in your financial history, such as defaulting on a loan. Thanks to comprehensive credit reporting, positive events may now be reflected in your credit report.
This is useful in helping to determine if a negative event was a one-off mistake or a pattern of behaviour, as well as rewarding those who make positive financial decisions. Comprehensive credit reporting may help those with less-than-stellar credit scores improve their credit history and gain credit approval.
How opening a savings account may impact your credit score
When it comes to opening a savings account, there is very little risk of hurting your credit score, as per the above.
The most pressing concern may be the impact of a credit check. Thankfully, savings and bank account providers do not perform hard credit inquiries into new customers. Meaning, Australians with less-than-average credit scores can still open a savings account.
Credit checks occur when you apply for credit products, such as a home loan, personal loan, or a credit card. They may also occur when you sign up as the account holder to pay various utilities, such as an energy bill, gas bill, or even a phone plan.
Further, after you’re approved for a savings account, using the savings account responsibly may help improve your credit score. Because of comprehensive credit reporting, making regular deposits into it may be considered a positive event, and may be reported in your credit history.
Using a savings account to build up a nest egg may show lenders you’ve not only got financial discipline, but you could pay off an overdue bill in a pinch. Try making consistent savings deposits for several months without dipping into them and see if your credit score improves.
There may be more heavily weighted positive events you can pursue if you’re looking to boost your credit score. This may include paying off outstanding credit card statements and paying your bills on time.
If you’d like to check on your credit score without a hard credit inquiry, consider using RateCity’s credit score checker. Get a free copy of your credit scores from the two major reporting bureaus, Experian and Equifax, today.