savings

Savings history hardly impacts credit

Dear Dr. Don,
I'd like to close my saving and checking accounts with one bank and open new accounts with another bank that offers a higher rate. However, I'm worried that closing my oldest saving and checking accounts may have possible negative effects on my credit history and credit score. Could this happen?
-- Hao Hit

Dear Hao,
Your credit history and your savings history really don't overlap much. Your savings and checking accounts aren't listed on your consumer credit report. In fact, your savings and checking accounts have their own separate consumer report.

Closing your old savings and checking accounts won't do a thing to your credit report. There is a chance that opening new accounts will have some impact on your credit history and credit score. That's because a bank can run a credit check (hard inquiry) on you before opening your account. Even though you're not applying for credit, the hard inquiry will show up on your credit report. What's on your credit report is what goes into your credit score, so these inquiries can impact your score.

In a recent Dr. Don column, " Chase high-yield savings without fear," I advised the reader that closing and opening deposit accounts would not impact his credit score. I was taken to task by a few readers who cited the hard inquiries as a reason to be concerned.

I asked Craig Watts, public affairs manager at Fair Isaac Corp., to weigh in on the issue. Here's what he wrote:

"Bottom line, credit inquiries are usually a very minor contributor to a person's FICO score and simply aren't worth getting worked up about. In most cases, a hard inquiry costs the person's score less than 5 points. People can help themselves by focusing their energy on the basics in score management: pay bills on time, keep card balances low and take on new credit only when it's needed."

So unless you already have credit problems, feel free to adjust your banking (deposit) relationships in a manner that best meets your needs. The impact on your credit score is minimal.

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