A Credit Check When Opening a Bank Account

Banking history almost never affects credit history because there is a separate reporting system for that, but opening an account could require a credit check. Credit checks are usually an insignificant item on a report, but several small ones can do terrible damage and even prevent approval for a loan. Thus, consumers should find out about credit check policies of a bank before opening an account.

Identification

Financial institutions often use credit checks to ascertain the creditworthiness of anyone applying for an account, because checking and savings can be overdrawn and become a loan, according to Marcie Geffner of Bankrate. If a bank performs a credit check, it usually shows up as a hard inquiry, which counts for zero to five points. It is possible for the check to be a "soft" inquiry, but this is rare.

Considerations

The act of applying for a bank account might not be the root cause of a bank's credit check, but options you choose when opening it. Banks may perform a credit check when you opt for overdraft protection, because this technically involves a small loan to buffer your account against overdrawing. Accounts with a debit card are increasingly accompanied by a credit check in 2011 because accounts can be overdrawn on those, too.

Effect

As a single item, credit checks barely even register and some people never notice their impact. Borrowers with low scores tend to lose zero or one point. Only good scores get the full brunt of the five points a check can cause. However, six to eight credit checks in one year can become a serious problem for anyone. Lenders may reject an application for too many checks, because opening too many accounts at once could strain a person's finances or ability to manage bills.

Tip

You should always keep tabs on your bank account to prevent it from going over its available balance, but you can avoid overdraft protection by linking a checking and savings account. This, however, still puts you at risk from overdraft fees unless you have overdraft protection. The only way to know for sure if opening an account or opting in for overdraft protection hurts your credit is to ask the bank if doing so requires a hard credit check.