How Your Credit Score Is Affected By Bank Account Applications

December 8, 2020

How Your Credit Score Is Affected By Bank Account Applications

Bank accounts are good to have. All money up to $250,000 stored in most American banks — those backed by the Federal Deposit Insurance Corporation (FDIC), at least — is protected from theft or bank failure, says the Congress-created independent regulatory agency. They’re convenient, offering mobile, online, and around-the-clock service. Also, they can help you build your credit score or even access credit in the first place.

When Is Your Credit Report Accessed?

You might know that your credit score can be affected by financial institutions, employers, and service providers (e.g., insurance companies) who request your credit report from Equifax, TransUnion, and Experian, the big three credit bureaus. Such changes only result from “hard pulls,” which usually result from applying for lines of credit, loans, or financing offers.

“Soft pulls,” says Money Under 30, typically are performed by employers, insurance companies, or credit card companies. Keep in mind that credit bureaus aren’t the only type of entities approached by these organizations to learn about your information. Consumer reporting agencies (CRA), which are similar, work with banks by providing them with American consumers’ bank account histories.

How Does ChexSystems, a Consumer Reporting Agency, Affect Me?

It’s true that credit bureaus are the leaders of the financial background business. They hold distinct, powerful protections from the U.S. government and must follow certain rules to be fair to consumers. However, banks also turn to CRAs for help with bank account activity, specifically.

Although most consumers are approved for bank accounts, especially basic ones with no frills or special offers, consumer financial institutions still turn to consumer reporting agencies that track bank account histories such as ChexSystems. According to WalletHub, roughly four out of five American banks turn to ChexSystems for help with screening consumers’ applications.

Unlike the three major credit bureaus, when banks pull your information from consumer reporting agencies, your credit score won’t be affected. Other popular CRAs include Early Warning Services, First Advantage, GIS, and LexisNexis Screening Solutions. No matter what consumer reporting agency pulls your info, your credit report won’t be affected.

Exceptions to Keep in Mind About Consumer Reporting Agency Checks

Though you should always perform your own research about banks you’re thinking about applying to, most financial institutions here in the States won’t bother performing “hard pulls” of your credit report. Some will, though.

Bankrate, a leading financial educator and information provider, has found that American Airlines Federal Credit Union, BBVA Compass, and other large banks do perform full-on credit report pulls from Equifax, Experian, and TransUnion for new checking and savings account applicants, not just the CRAs.

It’s seen as risky whenever people apply for multiple loans, financing offers, or bank accounts at once. Therefore, to reduce risk, apply sparingly for bank accounts unless you absolutely need one as soon as possible.

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