Do my checking savings and investment accounts help my credit score?

Debt to available credit ratio

Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)

Checking and Savings Accounts are not part of your credit file

I’ll have to put this question in the very large category of things about the credit scoring system that don’t fit in with what our common sense says should be so.  After all isn’t the fact that a consumer has savings an important criteria for credit?  What better cushion for hard times than a person’s own savings?  Checking and savings accounts are not part of your credit file.

It makes a lot of sense to use extra savings to pay down credit card debt.  The credit card debt interest is costing a lot more than the pathetic interest that banks pay for savings these days.  This cuts your debt to available credit ratio which immediately raises your credit score.  You can always take it back out in case of an emergency but you will  need to pay large cash advance fees.

Bank Accounts are not considered “Predictive” by credit Bureaus

The aim of the credit scoring algorithm is to predict the likelihood of a consumer defaulting on their debt.  The five areas considered the most predictive by the credit scoring agency FICO are enumerated in the pie chart that accompanies this article. Another amazing fact is that a high salary has no place in your credit files.  Credit reporting agencies don’t care how much you make.  All they care about is how you manage what you do have.

Bounced checks don’ t show on credit reports

As long as you make good on a bounced check it will not influence your credit score.  Of course if you ignore it and it goes into collections that’s a different matter.  The collection of the bounced checks by a debt collection agency will go on your credit reports if you let it go that far. This or any other collection activity will do a lot of damage.

But there is a perfectly legal trick

There are tricks to every trade.  Not tricks in the sense that that word indicates deceptive.  I mean tricks that insiders and people sophisticated about financial matters use in a perfectly straight forward and legal manner.  You can pledge your savings CD to secure a line of credit.  The amount of that CD can be reported to the credit reporting agencies as the limit for that line of credit.  If you don’t use it at all or use it only when necessary it will increase your debt to available credit ratio.  The debt to available credit ratio is a very important component of your credit score.  The most important way it is measured is in the aggregate.  It is also important not to have any one credit card too close to its limit.  If you were near the limits of all your credit cards you would be near 100 percent utilization.  If you also had a line of credit secured by a $10,000.00 CD that you weren’t using you would cut this utilization down to 50 percent!  That’s still high but it represents a major improvement.

No.  Credit Reporting agencies don’t keep track of your accounts with your bank or of your investment accounts with brokers, stock holdings or things of that nature.  For instance a simple Insufficient funds incident is not forwarded to credit bureaus like payment records on money you owe on credit cards is.

 

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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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