My Credit Is Poor. Can I Still Open a Savings Account?

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KEY POINTS

  • If you have poor credit, you might struggle to get a loan or credit card.
  • But opening a savings account should be much easier.
  • Having a savings account may even make it possible for you to improve your credit.

Will a less favorable credit score stop you from putting your money in the bank?

There's a reason consumers are advised to work on building their credit, especially if it happens to be poor. A less-favorable credit score can make it very difficult to borrow money when you need to, whether in the form of a mortgage, auto loan, or personal loan. A poor credit score can also make it tough to qualify for a credit card.

If you've been denied a loan or credit card due to your credit score, you may be wondering how well you'll fare if you try to open a savings account. The good news? You really shouldn't have difficulty at all.

Why poor credit doesn't matter when it comes to your savings

Lenders use your credit score as a measure of how risky you are as a borrower. A poor credit score might send the message that you don't have the strongest history of paying bills on time, and that you may be more likely than another borrower to fall behind on loan payments. As such, it's easy to see why you might have a difficult time getting a loan or credit card when your credit score needs work.

But savings accounts are different for one big reason -- you're not asking to borrow money. Rather, you're saying that you have money, and that you'd like to keep it someplace safe.

When a bank lets you open a savings account, it's really not taking any risk. If you have $500 to deposit into that account, great. It's not like you're asking the bank to give you $500 to put in. So there's really no reason why a poor credit score should stop you from being able to find a home for your money.

In fact, a savings account could actually help you boost your credit. How so? Let's say you have a history of being late with bills because you've run out of money on occasion. If you suddenly come into a pile of cash (say, through a tax refund or bonus at work) and you make the smart decision to stick it into a savings account, you'll have money to tap the next time you get a bill that your paycheck can't cover. That could, in turn, allow you to be on time with that 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 still pays to work on boosting your score so you're able to get a loan the next time you need one. In addition to paying bills on time, a great way to bump up your credit score is to chip away at some of your existing credit card debt. If you're able to whittle a $5,000 balance down to $3,000, for example, it could push your credit utilization ratio (a measure of how much of your total credit you're using) down to a better place and help improve your score.

It's also a good idea to check your credit report for errors. Credit report mistakes are more common than you might think. And the last thing you want is a lower credit score than you deserve because of incorrect information.

These savings accounts are FDIC insured and could earn you 11x your bank

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Two of our top online savings account picks:

Rates as of May 28, 2024 Ratings Methodology
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APY: up to 4.60%

APY: 4.35%

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