Will Opening A Savings Account Affect My Credit Score?

Updated: March 19, 2024 Author:

Quick answer: Opening a savings account typically does not affect your credit score. This is because savings accounts do not report to the credit bureau. The majority of UK banks will do a soft credit check that is used to verify your identity and banking history.

In very rare instances, the bank may pull your credit report, which may have an impact on your credit score. Should they request a credit report, it will have a temporary and minor impact on your credit score.

    What is a Savings Account?

    Savings accounts are as the name suggests. They are bank accounts where you can keep your money in a safe place while earning interest. They encourage saving with higher interest rates than other accounts, such as a current account. A savings account can assist you in achieving your long-term financial goals, but they are useful for short-term savings. 

    Savings accounts offer an excellent solution to cover unexpected expenses, protect your other finances, and cover you in the event of an emergency.

    What is a Soft Credit Check?

    There are two types of credit checks that you need to be aware of. The first is a soft credit check, while the second, is a hard credit check. When opening a savings account, the bank usually does a soft credit check. This verifies your identity. Many of the comparison websites will also use a soft credit check when providing you with savings account information. This type of check does not appear on your credit report and therefore, it will not impact your credit score.

    The type of credit check you do need to be wary of is the hard credit check. This check appears on your credit report and will affect your credit score. Hard credit checks are used when you are applying for credit, whether it’s a loan, credit card, or store credit. It is used to help the lender identify your ability to make payments on time. The bank or lender must get your permission before they carry out a hard credit check, as it can impact your credit score for up to one year.

    Why Is My Credit Score Important?

    You want to protect your credit score as much as possible. It is used to assess risk when lending money. Everyone has more than one credit score and this is because most lenders have their own in-house scoring systems. As a result, you will have multiple credit scores at any given time. 

    Each bank and lender relies on different information to work out a score, using a variety of formulas. The credit reference agencies, along with the lenders, award points for different information, based on their lending policies. 

    Protecting your credit score is the best way to ensure that should you ever need a loan or a credit card, you will be looked upon favourably by the bank and not considered a risk. This helps to increase the chance of your application being approved.

    Will a Savings Account Improve My Credit Score?

    If you are carefully putting money into your savings account, you may be wondering if it will improve your credit score. Bank account information is not displayed on credit reports, therefore a savings account will not improve your credit score. It is important to note, that some lenders will use information on your bank accounts and assets to determine if you are in a position to take on debt.

    How Do Savings Accounts Work?

    There is not only one type of savings account provided by banks in the UK. There is a range available, offering a variety of interest rates. Opening a savings account provides you with the opportunity to deposit money into the account and earn interest, helping your savings grow over time. 

    Some savings accounts allow you to withdraw the money as and when you need it, though there are accounts that require you to send a notice when you want to withdraw funds. This is a great way to help you save, reducing the risk of you spending the money. Savings accounts are safe, providing you with a chance to let your savings grow.

    Some of the more common savings accounts available include:

    • ISAs (Individual Savings Accounts) enable you to save money, and earn interest and they are tax-free. There are a choice of ISAs available, including stocks and shares, along with cash ISAs.
    • Easy Access Savings Accounts enable you to deposit and withdraw your savings at any time without any notice period or penalties. These savings accounts do not usually have a minimum deposit requirement.
    • Notice Savings Accounts do require you to give notice when you want to make a withdrawal. Notice periods can be anywhere from thirty to one-hundred-and-twenty days. These accounts tend to have a much higher interest rate, helping you earn more on your savings in the long run.

    Will My Credit Score be Affected by Having Multiple Savings Accounts?

    When opening a savings account in the UK,  only a soft credit check is performed, your credit score will not be affected should you choose to have several savings accounts with a variety of banks. 

    Is Opening a Savings Account a Good Idea?

    Savings accounts are an excellent way to save your money. Anyone aged sixteen and older who is a UK resident can open a savings account. This encourages savings by committing to pay a set amount every month. In return, the bank you have selected pays you interest on your money, helping you to grow your savings for the future.

    Whether you are sixteen and have been given a lump sum of money that you want to protect, or you are just starting your first job, a savings account is a great way to encourage savings, making it a habit and ensuring you have the cash you need for unexpected emergencies and expenses.