In this article:
- Do Bank Accounts Help You Build Credit?
- Bank Accounts Can Affect Getting New Credit
- How to Build Credit
Bank accounts can help you manage your money and keep it safe, but banking activity isn't typically reported to credit bureaus. For that reason, it won't generally help you build credit.
There can be exceptions: Some fintech companies have created checking accounts and debit cards with features that help you get credit for your bank account activity. These are new to the scene, and they aren't the norm. So, for the most part, banking activity won't impact your credit score.
That said, keeping a healthy balance—or an emergency fund on hand—can indirectly help protect your credit by ensuring that unexpected expenses don't result in missed payments. In addition, savings may help you qualify for secured credit cards or loans, which can help you build credit.
Do Bank Accounts Help You Build Credit?
For the most part, bank accounts don't help you build credit, because deposit accounts—which include checking, savings, certificates of deposit and money market accounts—are not reported as accounts to the credit bureaus. Bank accounts typically are those that you use for transactions, like depositing paychecks and paying bills, as well as for saving money.
It's easier to get a loan if you already have a bank account because creditors can more easily check your cash flow and verify income. If you borrow money from your bank, that account will likely be reported to the credit bureaus. That is true even if the loan account appears on your bank statement. It is still a credit account.
Types of accounts that are reported to credit bureaus include:
- Credit card accounts
- Personal loans
- Home equity loans and home equity lines of credit
- Mortgages
- Student loans
- Auto, RV and motorcycle loans
- Cellphone loans
Bank Accounts Can Affect Getting New Credit
While bank activity for most conventional bank accounts won't affect your credit scores, it can affect your ability to get approved for a mortgage. Mortgage lenders look at bank statements when deciding whether to approve your application. High assets and stable finances can suggest lower risk in making a loan.
For some consumers, bank activity can be considered if they choose to link their bank accounts to get credit for stability demonstrated there to produce an UltraFICO score. This score looks at:
- How long accounts have been open
- Frequency and recency of transactions
- History of positive account balances
- How consistently your accounts have cash on hand
While it's not yet widely available, it could lead to more options and better terms for some borrowers.
How to Build Credit
Although the average bank account isn't part of your credit history, there are plenty of ways you can build good credit, whether you are recovering from a setback or starting from scratch. They include:
Secured or Unsecured Credit Cards
Credit cards—whether secured or unsecured—are generally reported to credit bureaus, so paying on time and keeping balances low can help you build credit. Payments that are at least 30 days late can do lasting damage to your credit score, so it's crucial to pay on time. The portion of your credit limit in use—known as your credit utilization rate—also affects your credit scores, so using just a small portion of your limit and keeping balances low can help. Keeping credit card accounts open unless you have a compelling reason to close them can also help build credit.
It's worth noting that, although many debit cards look like credit cards and can be used where credit cards are, they are not the same thing. Debit cards take money directly from your bank accounts; there's no waiting for a statement or deciding how much of the bill you can afford to pay this month as there is with a credit card. Debit card activity is not reported to the credit bureaus.
Authorized-User Status
Authorized-user status allows you to use a credit card to make purchases but does not obligate you to pay the bill. It does allow you to benefit from the credit limit and the payment record of the primary user, but its impact on your ability to qualify for credit in your own name may be limited.
Installment Loans
Student loans, cellphone loans, credit-builder loans, car loans and mortgages are all generally reported to credit bureaus. All are installment loans, meaning the payments are level and for a set number of months.
As with credit cards, paying on time can help you build credit, and paying late can hurt your credit score. Credit scores reward consumers who have both revolving (reusable, as with credit cards) and installment credit—a factor called "credit mix."
The Bottom Line
In general, a bank account won't help you build credit. But experience managing your money and creating and sticking with a budget can be a huge help in managing credit responsibly. If you're new to credit, money in your bank account might help you by serving as a security deposit for a secured credit card or secured loan. Using a credit card—secured or otherwise—and keeping balances low and paying on time, every time is likely to result in a good credit score.
An installment loan can do much the same thing to establish a positive payment history. You do not have to have a credit card to build good credit (you can also do it using only credit cards, though scores reward consumers who use both responsibly).
If you haven't had credit before, you can still create a credit report with Experian Go™, which will help you determine your best strategy for starting to build credit.
