How Checking Accounts Affect Your Credit Score

Credit scores are more important than many people think. Yes, they’re used to help lending institutions determine whether someone is an acceptable risk for a loan, but they’re also used for other purposes.

Common things that credit scores influence include:

  • Obtaining a loan
  • Landing a job
  • Getting insurance coverage
  • Obtaining utilities
  • Renting an apartment

While many factors go into determining your credit score, you may wonder if opening a checking account is one of those factors.

Does Opening A Checking Account Affect Your Credit Score?

Credit scores primarily serve as a way to assess how well you handle your debts. Because of this, most checking account activity does not impact your score. Writing checks, making deposits, and the number of bank accounts you have are not actions you need to worry about.

Although most people enjoy the use of their checking accounts without any problems, here are four ways checking account activity may affect your credit score:

1. Hard Credit Checks

Does opening a checking account affect your credit score?

A bank or credit union may make a soft inquiry on your credit when you open a new checking account to check for a history of fraud. These soft checks do not affect your credit score. However, in some cases, a bank may perform a hard credit check, which does affect your credit score.

Banking institutions run a hard credit check when a new customer requests banking services that involve a loan of some kind. These checks lower your score for a period of 12 months and drop off of your credit report after 24 months.

2. Closing an Account with a Negative Balance

Another action that may affect your credit score is closing an overdrawn bank account. If you don’t repay the balance owed, the bank or credit union may do one of two things.

If the amount is small, the banking institution might write it off as a loss. If the overdrawn balance is significant, the bank may turn it over to a collections agency and report it to the credit bureaus, which then affects your credit score.

3. Signing Up for Overdraft Protection

Overdraft protection is a type of loan for your bank account. If more money is withdrawn from your account than you have in it, the bank or credit union will cover you temporarily until your account balance is restored. You may be charged an overdraft fee for this service.

Because overdraft protection is a form of a loan, many lending institutions will do a hard credit check when you sign up for this service. They want to make sure you have a good credit history before extending credit to you.

4. Being Overdrawn Without Protection

Another situation where your checking account may affect your credit score is when your account is overdrawn without overdraft protection.

If you don’t repay the balance and associated overdraft fees, the bank or credit union may turn your account over to a collections agency. The agency will then inform the credit bureaus of the situation, impacting your credit score.

What to Do If You Are Denied a Checking Account

Another way that banks and credit unions decide to approve a new checking account is by reviewing your banking history through a verification service known as ChexSystems. This verification does not affect your credit score.

ChexSystems is similar to the credit bureaus, except that it records negative banking information, like overdrafts and unpaid fees. If your ChexSystems report contains negative information, you may be denied a checking account. This doesn’t mean you have to live without banking services because you have a few options.

1. Find Out Why You Were Denied

Under the Fair Credit Reporting Act, lending institutions must disclose why they denied an applicant a checking account. The most common reasons for denial include overdrafts and unpaid fees, although there could be other disqualifying issues.

2. Review Your ChexSystems Report

It's a good idea to review your ChexSystems report to find out what it says about your banking history. Although you may have been denied a checking account for a specific reason, there may be other information on your report that needs to be addressed. You can obtain one free copy of your ChexSystems report annually at

3. Resolve the Issue(s)

If you owe a bank or credit union money, be sure to repay it as soon as possible. After you clear the debt, your payment is reported to ChexSystems.

If there is incorrect information on your ChexSystems report, contact the reporting bank or credit union to resolve the issue. If it isn’t resolved to your satisfaction, you can dispute the information directly with ChexSystems.

4. Consider a Second Chance Checking Account

If you have been denied a checking account because of something on your ChexSystems report, it could take a while to resolve the issue. In the meantime, you will still need a way to conduct banking business.

One option to consider is what’s referred to as a “second chance checking account.” As the name implies, these accounts exist for people who have been denied checking accounts. They usually have regular checking account features but impose higher fees or larger upfront deposits.

Where to Find a Free Checking Account

The world is continually changing, and businesses now charge for many previously free things, like air for your vehicle’s tires. Although it’s easy to get discouraged by the constant bombardment of fees, surcharges, taxes, and other things that take your hard-earned money, there is one thing you can still get for free – a checking account at a credit union.

Credit unions are uniquely positioned to offer free checking accounts because they have lower overhead than large banks. Many credit unions are also structured as non-profit organizations, which allows them to focus on serving their members instead of worrying about making a profit.

Check out the following article to learn more about free checking accounts at credit unions.

Read more about free checking accounts