What Do Banks Know About Your Credit?
Your credit score determines whether you qualify for important financial products, such as mortgages, personal loans, car loans and credit cards. Your score also influences your interest rate if you do qualify for these products. You’re probably aware that lenders access your credit score when they’re making decisions about extending credit, but what about your bank? Do they pull your credit score when you open an account? What does your bank really know about your credit score anyway?
What banks know about your credit history — and when
When you apply for a bank account, the bank has a right to pull your credit history. But rather than go to the major credit bureaus, banks will often use ChexSystems, a specialty consumer reporting agency that provides information on assessing the risk of opening new accounts.
“It’s a big database,” said Nathan Danus, director of housing and community development at DebtHelper.com in West Palm Beach, Fla. “If you bounced a check at your local grocery store three years ago and your former bank charged off your account, your new bank is going to know about that.”
But banks might check your credit score for other reasons, like if they’re considering giving you some form of credit with your account, such as overdraft protection, said Mike Sullivan, director of education at Take Charge America in Phoenix.
Here are answers to some common questions about banks and credit reports.
Some important questions — and answers
Question: What do banks check if I’m applying for a loan?
Answer: It depends on the size of the loan. Generally, the bigger the loan, the more thorough the credit check.
“If you apply for any kind of a loan at a bank, they are certainly going to check your credit score,” Sullivan said. But if it’s a major loan, they may go a step further and pull your whole credit report. Your credit report includes more detailed information about your credit history, including your open and closed accounts, your credit limits and outstanding balances.
Question: How do I know what banks will see when I apply to open an account?
Answer: Since most banks use ChexSystems to screen people applying for a checking or savings account, consider getting a copy of your consumer disclosure report from ChexSystems. You are entitled to a copy under the Fair Credit Reporting Act. You can request a copy online.
Since there is a possibility that the bank may also check your credit score, especially if you’re applying for overdraft protection, you may want to find that out as well. There are several free tools for checking your credit score online, including My LendingTree, which offers free access to your credit score and alerts when there are changes to your credit report.
Question: What happens if I’m declined for an account?
Answer: If you’re declined for an account, you have a few options. The bank is required to disclose what information they used to make their decision, as well as the name, address and phone number of the agency that provided the information. You can get in touch with the agency for a copy of the report and review it for any inaccuracies or errors.
You can also take steps to improve your credit score if that was a factor in the account decision. Paying down balances and paying bills on time could help you improve your chances next time. You can also talk to a credit repair agency.
If you’re unsure about what your bank will find when you open an account, consider reviewing your ChexSystems account, getting a copy of your credit report and finding out your credit score. If you find errors, contact the relevant agency and let them know about the error. Do what you can to improve your credit score, and consider using LendingTree’s personal loan tool to connect you with a financial product that is right for you and your financial situation.