A certificate of deposit, or CD, is a deposit account in a bank or other financial institution. The CD has a specific interest rate, dollar amount and redemption period that determines long the money must remain in the account to avoid a penalty for early withdrawal. If you withdraw funds from the account early, it's a good idea to understand if this will affect your credit score.
Significance
According to myFICO, a FICO credit score is a numerical representation of your credit history based upon the credit information from Equifax, Experian and TransUnion. The lowest score is 300 and the highest is 850. Credit scores are not static but change based upon the changes that occur within your credit report. The score looks at your payment history, amount of debt, length of credit history, mix of credit types on your report and the amount of new credit inquiries on the report.
Considerations
A FICO credit score is a reflection of your usage of credit. A certificate of deposit is not a credit-based item. The bank does not extend credit when opening a certificate of deposit. It is a form of savings account and therefore, it is not considered as part of your FICO credit score. If you withdraw a certificate of deposit early, you may have to pay a penalty for that withdrawal, but the bank will not report the information to Equifax, Experian or TransUnion.
ChexSystems
Banks use a different credit reporting agency when it comes to bank accounts. Consumers who mishandle checking accounts or other bank accounts are reported to ChexSystems. The bureau maintains a database of bank accounts closed because of bounced checks, unpaid negative balances and other negative occurrences. It is not affiliated with Equifax, Experian or TransUnion. ChexSystems issues its own consumer credit score to financial institutions that ranges from 100 to 899. The higher the score, the lower the risk. The early withdrawal of a certificate of deposit is not considered a mishandled account by the bank and isn't reported to ChexSystems.
Your Rights
If you want to check your banking credit score from ChexSystems whether you have or have not withdrawn a CD early, you have the right under the Fair Credit Reporting Act to request it. ChexSystems only accepts such requests by mail. Print out the Score Order Form from its website, fill it out and include the applicable fee. You can request a free credit report from ChexSystems, but you must pay for the credit score. Once it receives your request, ChexSystems will mail the score to you within five business days.
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