Is there anything that you need to know before opening a new bank account? It is then you realise if this move will affect your credit scores by any chance. Having a bank account is crucial even at the time of applying for a credit card or any funding solution.
Most importantly, you can have one for a separate purpose. Thus, you can have as many accounts you want to have with different banks. However, the impact of having a new one on your credit history needs to be figured out.
The generalised answer to this question would be ‘no’. Despite this, you cannot overlook the chances of some impact on credit scores. This will be because of the bank you have chosen to work with.
Some banks would like to carry out hard inquiry. From this angle, you need to be selective about the bank to which you are going to create a new account. At times, lenders make it a point to review the account balances before approving financing options like pounds 10k loans, etc.
All this is to confirm your account has the necessary cash to utilise for loan payments. Thus, the effect of a new bank account on your credit scores cannot be a straight answer. It would be better for you to flip through this blog as it can share a lot of information concerning this.
The truth about new bank accounts and credit scores
A new bank account cannot have a direct effect on your credit scores. It can be a rare incident, depending on the provider you choose. However, accessing an active bank account is vital.
This significant criterion you have to fulfil before getting loans. Besides, your account activities can influence your scores. If your bank account is overdrawn and you have never made an attempt to clear the dues, it can hurt your credit scores.
In this situation, you will be levied with additional fees. In addition, pay attention to another thing i.e. the closure of an account with a negative balance. Thus, auto-debits, withdrawals and deposits can influence your credit records.
What can you do to prevent any impact of your bank account on your credit scores? You can find below.
· Do not utilise over-drafting
This is a unique facility that might be available with selective banks. It enables you to draw out more money than what has been there in your checking account. The bank will adjust the negative balance if you have opted for this facility.
Nevertheless, you can avail of this facility up to certain extent. You need to meet the overdraft fees as decided by the lender. You cannot escape the payment of the overdue amount.
Timely payment of fees will keep you in a safe place. This means it will give protection to your credit scores. Otherwise, your credit report has to record this activity.
Paying for something that exceeds the balance you have in your account should not always be practised. In the case of any emergency, an overdraft facility can be used. Be vigilant while opting for the auto-debit option.
You might not realise even if your account gets overdrawn. Review your account and activities from time to time to avoid any consequences from overdrawn money.
· Always check the account balance before nullifying
It does not matter if the given account is no longer in use. Still, you must keep a record of its balance. At times, the account balance might go negative since you have not checked it for a long time.
Although you might not face many problems while closing it, the negative balance will grab the attention of the credit bureaus. Closing a bank account that has a balance which you have not cleared up can have the worst repercussions.
To be safer, you must always check your account balance. This step becomes crucial, especially when you have decided to get rid of the account forever.
· Avoid having joint accounts
Now, this kind of bank account can impact your credit history. How? Maybe your co-borrower is suffering from low credit scores?
The worst effect will reflect on your credit history as well. Not only this, but also your scope of getting low APR loans will also be lower. The reason is that before providing a loan, all your accounts might be checked.
Besides, your financial partnership has already damaged your credit scores. Upon finding out about your questionable credit scores, the loan provider will automatically reject your application. For this reason, it would be pointless to continue such a financial association.
Nothing fruitful is happening because of it. Therefore, you must do what is necessary to remove your name from such an account even though it has been newly created. You cannot initiate the process on your own.
Call directly or write an email addressing the respective bank. They have the authority to carry out the necessary checks to eliminate your name from this account.
· Set direct debits for crucial payouts
At times, your forgetful nature might cost you a blot on your credit history. Despite having sufficient cash in the bank account, the payment cannot be completed on time. To tackle this problem, you must take advantage of automation.
Let technology step in to solve this problem for you. Just opt for the auto-debit option and make sure to have the specified amount before the due date. Once this is done, you can leave the remaining thing on technology.
Your payments will be cleared up on time. This way, your credit history will stay positive. Besides, when the payments are made within time, your scores will upgrade.
This will help improve your credit history. Thus, taking the necessary actions on your bank account is vital for the betterment of your credit scores.
The bottom line
Regularly using a bank account responsibly will help your credit scores improve and increase. Moreover, be careful and smart if you have to borrow money to cover any additional financial needs.
