Does It Hurt Your Credit to Have a Lot of Bank Accounts?

There is no limit to the number of bank accounts a person can have, so some people end up with many different accounts open at the same time. Normally, these accounts do not relate to your credit score. However, they may connect to your credit score under certain circumstances.

The Misconception

People typically are confused about whether a large number of bank accounts hurts your credit score because they do not know for sure whether banks report to the three major credit bureaus, Experian, Equifax and TransUnion. Banks do not report to the credit unions, so credit scores are not connected directly to the accounts you have in most cases.

ChexSystems

Even though banks do not report to credit bureaus, they do report to ChexSystems. ChexSystems is a credit reporting agency that keeps track of mishandling of bank accounts. For example, your bank may report to ChexSystems that you bounced checks or drove your account into the negative by not taking care of fees. Your ChexSystems score is not the same as your credit score. However, creditors sometimes look at these scores together to determine lending risk because the way you handle your bank accounts sometimes is a good indication of whether you will repay money borrowed against a line of credit. Subsequently, too many hits on your ChexSystems report may cause creditors to deny you credit. This can hurt your credit score indirectly if the credit requested is essential to making payments elsewhere.

Credit Inquiries

At some banks, a credit check is required to open an account. The banks that require this do it for the same reason that creditors look at your credit score -- they want to determine whether you will handle the account properly. Inquiries can show up on your credit report. One or two of these inquiries is not much to worry about, but many inquiries can pull down your credit score significantly.

Complexity

Any time you have multiple financial accounts, the task of keeping track of the account balances and activities becomes more complex. If you are not diligent with your accounts, the likelihood you will accidentally bounce a check or drive an account balance negative increases. If you do not pay what you owe related to these mistakes, banks may opt to send your account to an internal collections department or to an external collections agency. Anything that goes to collections shows up on your credit report and can lower your score.

Considerations

Typically, because banks do not report to the major credit bureaus, opening many different accounts will not impact your credit score. However, this depends on the bank and how you handle the accounts. It is possible for your credit score to decline if the banks require credit inquiries, you mishandle the accounts or creditors see a negative ChexSystems report. Usually, people only need three accounts at most. These include basic checking and savings accounts and an account for money that should be separate for tax purposes, such as Social Security or business funds.