Should I switch from a bank to a credit union?
June 28, 2006 9:39 AM   Subscribe

CreditFilter: Does opening a new account look worse on your credit than keeping an older one?

I have a savings account with a very credible, very loan-friendly credit union. I also have several checking accounts [among my boyfriend and myself, not just alone] through a not-so-nice bank. I have heard that the credit union is the way to go when I finally decide to purchase a house. I have also been told that they are more likely to give me a loan if I do my checking with them, as they can see my withdrawals and deposits.

The bank I am currently using and I have not been getting along. They have been charging us overdraft charges when I don't think they should have been, and I have more than once had to actually call them and clear up some problems with our accounts.

I would like to switch my checking account from the bank to the credit union. I am worried, however, that a switch in my account history would end up hurting my credit. Does anyone know if this is a valid fear, or is to so small as to not matter on a credit history?

What other factors might I be missing when considering switching from a bank to a credit union?

[For the record, I have had the bank account for around three years, and the savings account for about two.]

Thanks in advance.
posted by starbaby to Work & Money (8 answers total) 2 users marked this as a favorite
In twenty years of having a credit report I have not once seen a checking or savings account entry on my credit report. Which is unsurprising - they're not loans. Consequently they're not going to impact your FICO score.

It's possible - but unlikely - that your lender will examine bank account hopping as part of a larger examination, but I doubt it. Changing checking accounts doesn't have the same kind of implications that changing credit card lenders does.

Make the move. Stop rewarding poor performance by the bank with your dollars.
posted by phearlez at 9:55 AM on June 28, 2006

Response by poster: Wow, I feel like an idiot. People always told me not to overdraft my account because it would hurt my credit--I guess that doesn't matter, either?

As if I weren't coming off as naive enough, could you maybe tell me a little bit more about how changing credit card lenders affects things?

Thank you, I feel much better.
posted by starbaby at 10:12 AM on June 28, 2006

Repeated overdrafts may not impact your FICO score, but they are tracked by banks, and will make it more difficult to get a new checking account. You may be rejected outright, or you may be offered a regular ATM card instead of a debit card, depending on the frequency and severity of those overdrafts.

Changing credit card lenders can affect your score in several ways: just applying for a new account causes a (relatively minor) FICO score reduction, whereas the age of your accounts is a positive factor. Prospective lenders want you to stick with them and not shop around too much, even when (or especially when) that's not in your own best interest. There's also the matter of the limit your new lender gives you, which may be higher or lower than what the old lender provided. If, for example, your new lender gives you a higher limit but your spending habits don't change, you'll be using a smaller percentage of your available credit, which is good. On the other hand, if you actually use that higher limit, even if you're still using the same percentage of what's available to you, your score may go down because your debt to income ratio has increased.
posted by Acetylene at 10:48 AM on June 28, 2006

Response by poster: Thank you. I wish I could just take a class on all of this, since the people telling me about it are obviously not so well-informed as I thought.
posted by starbaby at 12:16 PM on June 28, 2006

Yes, checking accounts to do not effect your credit score. Credit cards, revolving credit accounts, loans, debt ratio and inquiries are what make up your credit score (oh and payment history of course)

I think you should check out and read over that to get a better grasp of this whole situation.

Good luck
posted by crewshell at 12:19 PM on June 28, 2006

Opps, here is the link
posted by crewshell at 12:19 PM on June 28, 2006 [1 favorite]

Googling "understanding FICO" turns up this and this and a billion other things. If you're thinking ahead to a mortgage then spend a little time reading things about it - the savings in even .25 of a percentage point can be sizable.
posted by phearlez at 1:11 PM on June 28, 2006

Just FYI - I've found Suze Orman's advice on credit and FICO scores (and how they work) really easy to understand. She does a show on cable, and has a book if you're interested in educating yourself on how to build and maintain good credit/save for retirement/etc.
posted by theantikitty at 10:06 PM on June 28, 2006

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