Will a Savings Account Boost My Credit Score?
- Credit accounts function with money from a creditor. For instance, if you have a credit card, the credit card company fronts you anything spent on your credit limit whenever you make a purchase. You pay the credit card company back with your money later. With a savings account, you aren't borrowing from anyone. All the money in the account starts as yours. For this reason, having a savings account won't help your credit, as savings accounts aren't credit accounts.
- Banks typically don't report to credit bureaus unless you have a credit card through them. Instead, they report to ChexSystems. This agency looks at how you handle your checking and savings accounts. If you manage your savings account poorly, such as overdrawing your balance, the negative activity shows up on your ChexSystems report.
- Lenders sometimes look at your ChexSystems report just as they do your credit report. If you have too many negative items on your ChexSystems report, creditors and lenders may raise what you're paying in interest, opt to close your accounts or deny your new credit applications. All of this makes it harder to keep up financially, making the likelihood of becoming delinquent on accounts and lowering your credit score higher.
- Savings accounts do not directly help your credit. However, a good ChexSystems report can complement evidence on your credit report that you're getting your finances back in control. With good savings account management, your positive ChexSystems report may make creditors and lenders willing to keep working with you. If you can keep those relationships going, you'll lengthen your credit history and therefore possibly help your credit score.
