There are plenty of ways to work on building your credit. You should be working to pay your bills on time, lowering your debt to income ratio, and ensuring you have low credit utilization. However, what about a savings account? Can they impact your credit?

Can a Savings Account Help You Build Credit?

Generally, no – a savings account cannot help you build credit. At least not directly.

Savings (and checking) accounts do, however, help you build relationships with financial institutions. Lenders will generally ask to see your bank accounts when you apply for any type of loan or credit card, so a savings account could help you get a credit card that is much needed to build your credit score, for example. Lenders can also be more likely to grant you approval if you have an account with them and they know your history.

Savings accounts can actually also help your credit score another way – they can help you avoid late payments on your bills, credit cards, and other expenses. If you run into financial hardship, an emergency fund in your savings can help cover those bills until you get back on your feet. Late payments can severely hurt your credit score, so having a savings account is an excellent idea even though it doesn’t help you directly! It could be a difference-maker for your financial health and help you from running into more serious financial problems.

Other Benefits of a Savings Account

There are quite a few other benefits of having a savings account you should note, including

  • The money in the account will accrue interest

    • How much interest depends on the bank or credit union and the type of account you have

  • It’s often easy to set up automatic savings

  • You’ll always have access to your money

  • They’re ideal for emergency funds

  • Your savings are protected by the FDIC up to $250,000

How to Build Your Credit

Since savings accounts won’t directly help you build your credit, what can? There are a few different ways. You should

  • Always pay your bills on time

  • Pay off your credit card each and every money

  • Don’t overspend on your credit card

  • Be consistent with your income and work history

  • Keep your credit utilization low

    • You may want to ask for a credit limit increase to help you here, but don’t overspend

  • Improve your debt to income (DTI) ratio

If you’re struggling to get approved or build your credit, you may have to get a cosigner.

Just because a savings account doesn’t directly help your credit score, it doesn’t mean you shouldn’t get one. The benefits of a savings account can’t be understated, and if you ever apply for a loan or credit card, the lender will look at the money in your savings account. It could help you get approved down the line!