Ask whether bank pulls credit reports
Dear Dr. Don,
I currently have two savings accounts: one with a brick-and-mortar bank and a second with an online bank. I keep most of my savings with the online bank because it offers a much higher interest rate. However, I sometimes see that other online banks are offering better rates with better Safe & Sound ratings as well
Is it OK to open multiple online savings accounts so I can take advantage of the better rates? Perhaps I could open just one more account so I could switch back and forth between the banks offering the best rate.
I’m concerned that opening multiple savings accounts might affect my credit score. It’s currently pretty good at 772, and I’d like to keep it this way. What do you say?
— Carlos Credit
Sometimes banks will do a “hard inquiry” on your credit report, even though you are not applying for credit. A hard inquiry will affect your credit score, but not by a lot. Here’s what the myFICO.com pamphlet “Understanding Your FICO Score” has to say about the impact a hard inquiry has on your credit score:
For most people, one additional credit inquiry will take less than five points off their FICO score. However, inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk: People with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports.
A hard inquiry stays on your credit report for two years but only impacts your credit score for one year. Ask the bank before applying for the new account whether it will pull your credit report. It may tell you that it pulls your ChexSystems report. That’s a consumer report on your banking relationships and has nothing to do with your credit report. You want to know whether the bank pulls your credit report.
Your plan to shop for yields is a good one. Banks count on your complacency. That’s what teaser rates are all about. The rate gets you in the door and the bank hopes you’re too lazy to leave. Keeping them on their toes by moving the money to where you’re getting a higher rate will improve your returns and should have a minimal impact on your credit score.
You can shop rates using Bankrate’s “CD & Investments: Compare Rates” page.