My credit is weak. Can I still open a savings account?
Will a less favorable credit score prevent you from depositing your money in the bank?
- If you have bad credit, you may find it difficult to get a loan or a credit card.
- But opening a savings account should be much easier.
- Having a savings account can even help you improve your credit.
There’s a reason consumers are advised to work on building their credit, especially if it turns out to be weak. A less favorable credit score can make it very difficult to borrow money when you need it, whether it’s in the form of a mortgage, car loan or personal loan. A bad credit score can also make it difficult to get a credit card.
If you’ve been denied a loan or a credit card because of your credit score, you may be wondering if you’re trying to open a savings account. The good news? You really shouldn’t have any difficulty at all.
Why bad credit doesn’t matter when it comes to your savings
Lenders use your credit score as a measure of your risk as a borrower. A bad credit score can send the message that you don’t have the best track record of paying bills on time and that you may be more likely than another borrower to fall behind on loan repayments. As such, it’s easy to see why you might have trouble getting a loan or a credit card when your credit score needs improvement.
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But savings accounts are different for one big reason: you’re not asking to borrow money. On the contrary, you say that you have money and that you would like to keep it safe.
When a bank lets you open a savings account, they are really taking no risk. If you have $500 to deposit into this account, great. It’s not like asking the bank to give you $500 to invest. So there’s really no reason for a bad credit rating to stop you from finding a home for your money.
In fact, a savings account might actually help you boost your credit. How? Let’s say you used to be late with your bills because you ran out of money occasionally. If you suddenly come across a pile of money (for example, from a tax refund or a bonus at work) and make the smart decision to put it in a savings account, you will have money to use the next time you get a bill that your paycheck can’t cover. This could, in turn, allow you to be on time with this bill. And with enough on-time payments, your credit score should improve.
It pays to boost your credit score
While poor credit shouldn’t be a barrier to opening a savings account, it always pays to work to improve your score so you can get a loan the next time you need it. In addition to paying your bills on time, a great way to boost your credit score is to reduce some of your existing credit card debt. If you are able to reduce a balance from $5,000 to $3,000, for example, this could push your credit utilization rate (a measure of how much of your total credit you are using) to a better place and help improve your score.
It’s also a good idea to check your credit report for errors. Credit report errors are more common than you might think. And the last thing you want is a lower credit score than you deserve due to incorrect information.
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