Your credit score can be a mysterious number. Although there are obvious ways to improve your credit score - like paying bills on time - and obvious ways to hurt your credit score – like declaring bankruptcy – there are some activities that can affect your credit that are less obvious.
One of the most surprising of these activities is applying for a savings or checking account at certain banks. Some banks will run what is known as a "Hard Inquiry" or a "Hard Credit Check" on certain types of bank accounts, even if the applicant is only looking to make deposits and not applying for credit.
And whenever a bank checks your credit with one of these hard checks, a note is made in your credit report that will at least temporarily lower your credit score a bit.
For most people this won’t be an issue, but if you’re planning to apply for a mortgage the following week, a recent hard credit check can potentially make a difference in your rate, and in a worst case scenario, lead to you getting denied for a loan completely.
The rationale for lowering your score when someone does a hard credit check on you is that the occurrence shows you need to borrow money – and if you’re applying to borrow money from one lender, you’re a bigger risk to the next lender, so your score should be lowered.
Of course, when you open a bank account, you’re not asking to borrow money. However, some banks argue that when you open a savings or checking account, they’re essentially extending you credit, because you will owe the bank money if you overdraw the account. Thus, they need to do conduct a hard inquiry to make sure you’re credit worthy.
Luckily, making hard credit checks is not the policy of all banks – many only conduct a "soft" credit check to verify your identity and general information, so your credit score isn’t affected at all.
BankFox maintains a list of accounts for which the banks have told us they don’t conduct hard credit inquiries. And we've set up our savings and checking account lists so that you can choose to filter out accounts that may have hard credit checks.
Regardless, if you’re looking to open a bank account and it’s important for you to prevent a hard credit check, make sure to double check with the bank that they won’t do one before you apply!
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