Dedicated to Deposits: Deals, Data, and Discussion

Hard Credit Pulls and Deposit Account Applications


In many of my bank account reviews I often will mention if there's a hard credit inquiry in the application process. Hard credit inquires (also known as hard pulls) can temporarily ding your credit score. There's also a soft credit pull which does not affect your credit score.

It would seem we should only have to worry about hard pulls if we apply for credit cards or loans. However, many banks will do a hard pull when you apply for checking and savings accounts. Why? ING Direct does a hard credit pull only when you apply for the Electric Orange account which includes overdraft line of credit. Hard pulls when you apply for checking accounts (which often includes overdraft protection) are more common than when you apply for savings accounts or CDs. Other than overdraft line of credit issue, some banks have claimed the hard credit pull is just part of their process of ID checking. I've also heard suspicions from readers who claim it helps the bank cross market other products to you. Any other ideas why it's done?

Since hard pulls are done when we apply for some bank accounts, it's important to understand how hard pulls affect us. This Bankrate.com article provides some useful insights. The article describes some of the differences between soft and hard pull. In addition to the difference between their impact to your credit score, the article states that "When you pull your credit report, you can see both hard and soft pulls. Creditors can only view hard inquiries." According to the article, "Inquiries not related to a new financial commitment won't hurt your credit score." I'm not sure if this is 100% true since opening a deposit account shouldn't be considered adding a new financial commitment (except maybe related to a checking overdraft line of credit).

The article also describes how much a hard pull will cost your credit score. According to the article, it's from 1 to 5 points. It can vary based on your credit history. And about how long the impact lasts, the article states, "Hard inquiries stay on credit reports for two years, but the length of time they impact the score depends on the scoring model used."

One tip the article provides is about how to reduce the impact of hard pulls by grouping them in a short period. According to the article, "Multiple inquiries generated when rate-shopping for a mortgage, auto or student loan are consolidated by credit scoring models when done within a certain window of time." I'm not sure if this is also true for hard pulls associated when you're opening deposit accounts. But if you are going to open several deposit accounts, it probably can't hurt to open them up within a few days rather than within a few months. In addition to hard pulls, there's also the issue of ChexSystem inquiries. Some banks will reject your application if you had too many recent ChexSystem inquiries. I'm not sure if grouping your applications could also help with this issue. If you have experience with this issue, please leave a comment.


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Comments
15 comments.
Comment #1 by Anonymous posted on
Anonymous
I'm not one for more government regulation, but since they have their hands in everything anyway, it's about time the government regulates the credit rating companies.  Standardize the rating system and eliminate the unnecessary dings on credit reports, temporary or not. Dinging someone's score just because of numerous credit checks is frivolous.  Too much rides on an individual's credit rating today. Even some employers check credit scores before hiring new employees.

6
Comment #2 by Anonymous posted on
Anonymous
I used to work for Washington Mutual few years back, in the loan department. We always did a hard pull on any application from a consumer for the following reasons:

1) Stability of income
2) Stability of residence
3) Any outstanding judgments
4) Current opened accounts (loans or credits or deposits)
5) Different names used in the past
6) Any bankruptcies
7) Other members living and using the applicant's address
8) We also get the number of inquiry for the last 24 months
9) FICO score
10) Outstanding medical bills
11) Payment habits
12) Misc. ( I'm not suppose to disclose to the public)

Hard pull also discloses the character of the person and the social behavior.
There is much more to it than what you touched in your review about the credit pulls.

11
Comment #3 by AtHomeDad (anonymous) posted on
AtHomeDad
I would agree with Anonymous #1, and would include ChexSystems and related agencies in this examination of practices. There seems to be rules in place that favor corporate access to private information and statistical models and prediction rules rather than simply trying to evaluate an application on its merit.

I have impeccible credit, and was turned down for a Reward account due to too many ChexSystems inquiries. It would seem that "grouping account openings" doesn't help mediate the harm with ChexSystesm. I don't understand what harm occurs to a bank as a result of the number of savings and checking accounts I control? Inactivity fees or fees for early withdrawal seem to me to be sufficient protection.

Anonymous #2's post is a bit scary to me. I understand the Loan Department doing a "hard pull" and wanting to assess my financial behavior. The relation of financial behavior to social behavior??? The relevance of that to a checking or saving account??? Wow. 

As for, "12) Misc. ( I'm not suppose to disclose to the public)" -- WaMu and the ilk are not disclosing how they are using my own information?

Corporate colonization continues unabated.

Thanks again Bank Deals Guy for your great work. I'm slowly starting to appreciate the new site. I look forward to continued discussion of this topic. I am sure I'll be educated on this issue.

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Comment #4 by Anonymous posted on
Anonymous
I agree with Anonymous #2 regarding the social behavior being used against the borrowers.

 

Let say you open and close accounts just to receive the bonus. That becomes habit and projects a social behavior or a greed. Such applicants will be examined carefully and it could be a reason for rejection.

1
Comment #6 by Anonymous posted on
Anonymous
>Let say you open and close accounts just to receive the bonus. That becomes habit and projects a

> social behavior or a greed. Such applicants will be examined carefully and it could be a reason for

>rejection.

Actually I think it projects GOOD BUSINESS SENSE which is why the banks would reject the applicant. Banks today are set up to make most of their money on sneaky fees from customers that don't have good business sense. Those of us who know how to work the system aren't profitable enough.

6
Comment #7 by Scott (anonymous) posted on
Scott
I put a freeze on my reports to prevent this. So far I have still been able to accounts that do hard pulls but it usually requires an extra step like mailing in some ID info.

5
Comment #8 by Anonymous posted on
Anonymous
What if one has no credit score, say from lack of borrowing or inactivity? Do banks automatically reject the applicant?

Scott, is the extra information in place of them reviewing your credit report or to permit case-by-case review of your report due to the freeze?  I would almost rather send a little information or ID than have banks or related companies always looking through the report.

Thanks for the info and comments everyone.

2
Comment #9 by Anonymous posted on
Anonymous
.

 

>> Let say you open and close

>> accounts just to receive

>> the bonus. That becomes

>> habit and projects a

>> social behavior or a greed.

>> Such applicants will be

>> examined carefully and

>> it could be a reason for

>> rejection.

 

>>>> Actually I think it projects GOOD BUSINESS

>>>> SENSE which is why the banks would reject the

>>>> applicant. Banks today are set up to make

>>>> most of their money on sneaky fees from

>>>> customers that don't have good business

>>>> sense. Those of us who know how to work

>>>> the system aren't profitable enough.

 

Indeed ... Banks are 'for profit' entiies, and the rate-chasers (ooops ... I mean "we-the-savers") are going after the same thing 'profit' ... Therefore it is a mere matter of who (bank or depositor) get profit from whom.

 

.

2
Comment #11 by glxpass (anonymous) posted on
glxpass
Anonymous - #2, Friday, February 19, 2010 - 10:30 AM CT said:

I used to work for Washington Mutual few years back, in the loan department. We always did a hard pull on any application from a consumer for the following reasons:

1) Stability of income
2) Stability of residence
3) Any outstanding judgments
4) Current opened accounts (loans or credits or deposits)
5) Different names used in the past
6) Any bankruptcies
7) Other members living and using the applicant's address
8) We also get the number of inquiry for the last 24 months
9) FICO score
10) Outstanding medical bills
11) Payment habits
12) Misc. ( I'm not suppose to disclose to the public)

Hard pull also discloses the character of the person and the social behavior.
There is much more to it than what you touched in your review about the credit pulls.


Almost all of the above reasons have to do with credit concerns.  Opening a deposit account is entirely different.  Banks and Credit Unions commonly use ChexSystems to see deposit account history and use for identity verification a number of different options, including a credit bureau such as Equifax.  Using Equifax for identity verification doesn't incur a hard credit inquiry (which can ding your FICO score), but an innocuous soft credit inquiry (which doesn't affect your FICO score).

In short, there's no valid reason to pull a full credit report for someone who wishes to open a deposit account.  There are plenty of tools available bsides credit reports that can assess the likelihood of someone charging off to-be-opened checking account.  And existing identity verification processes that don't involve a hard credit pull are more than sufficient.

2
Comment #12 by scott (anonymous) posted on
scott
->>What if one has no credit score, say from lack of borrowing or inactivity? Do banks automatically reject the applicant?



Even if you don't borrow you will have a credit score and as long as nothing negative reported it will be a decent score

 

-->>Scott, is the extra information in place of them reviewing your credit report or to permit case-by-case review of your report due to the freeze?

Yes, The thing that ****es me off is when a bank claims they must pull the report due to the Patriot Act, Which is bull. Sure they must verify you but there are other ways. Even with a freeze my ChexSystems report can be pulled. Process is different if opening in branch or online, When I opened a Citi Checking account in branch they were able to override by me showing a couple forms of ID. Online can be a little more difficult, You will need to talk with someone. I remember one bank made me send in a copy of my DL and another time a bank was able to ask me those questions like what kind of car I owned, previous addresses and about other loans. They pull that from some public database  

 

2
Comment #13 by Gaelicwench posted on
Gaelicwench
AtHomeDad says: "Corporate colonization continues unabated."

 

I am not one for being a conspiracy theorist, starting rumors based on opinion and perception, since perception is not truth [but is one's reality]; however, after reading the manifesto by the individual who flew his private aircraft into a gubbermint building aka IRS in TX, it gives me reason to think far deeper than I normally do.

The corporations are doing all they can to remain unfettered (Read that: deregulated) when it comes to certain actions. The credit pulls, be it hard or soft, the delving deeply into one's very personal information, and basing their decision on someone who cannot afford to pay their medical bills due to: a)job loss, b)a loss in the family, so loss of income, c) being laid off; losing health insurance. The list goes on.

I've read this over and over again and really haven't found a reasonable explanation about why it is we have to pay, aside from the free credit reports - NOT scores - we're entitled to once a year. We still have to pay for the scores themselves.

Brings to mind how many of this country's grandparents and their parents preferred putting their money under the mattress. They didn't trust the gov't, corporations and their ilk to do what was right for the people. To this day, they are hale and hearty while the "commoners" are and will continue to struggle.

Apologies for digressing.....

1
Comment #14 by Anonymous posted on
Anonymous
.

 

>> I've read this over and over again and really

>> haven't found a reasonable explanation

>> about why it is we have to pay, aside from

>> the free credit reports - NOT scores - we're

>> entitled to once a year. We still have to

>> pay for the scores themselves.

Hmm ... I guess the simple explanation is you are getting a service from the credit bureau, and you must pay for the service they provide.  Credit bureau collect, categorize, and protect millions of records for months, years, decades. They do this of course for profit.  And when you get any service from a for-profit company, you better know that it is reasonable for you to pay than expect the service for free.

 

>> Brings to mind how many of this country's

>> grandparents and their parents preferred

>> putting their money under the mattress.

But ... noone is stopping their grand children, and great grand children to continue with this.  It is the free will of these grand children, and great grand children to deposit their monies in the financial institues.

 

>> They didn't trust the gov't, corporations

>> and their ilk to do what was right for the people.

>> To this day, they are hale and hearty while

>> the "commoners" are and will continue to struggle.

Well ... don't think so.  The very same people have formed the governments (federal, state, local ...)  and the very same people own the corporations that are publcly held. For example owners of Citi, Bank Of America, Chase are members of public of course.

 

>> The corporations are doing all they can to remain

>> unfettered (Read that: deregulated) when it comes

>> to certain actions. The credit pulls, be it hard or

>> soft, the delving deeply into one's very personal

>> information, and basing their decision on someone

>> who cannot afford to pay their medical bills due to:

>> a)job loss, b)a loss in the family, so loss of income,

>> c) being laid off; losing health insurance. The list goes on.

 

So? ... So what?  Even the corporations have freedom-of-expression and when they influence the law-makers they are merely exercising their right. 

The list you've put-up surely makes me sympathise with such people, however you got to know that there are some retirees, who are dependent upon their dividends, interest etc for their survival.  And who pays them these dividends?  ... Yes ... that's right ... the very same 'for-profit' corporations whose bonds, stocks are held by these "commoner" retirees.

 

>> Apologies for digressing.....

Accepted!

 

.

1
Comment #15 by Anonymous posted on
Anonymous
I think the banks do a hard pull because they want to lower your credit score, so that when you later apply for a loan or credit card they can charge you higher interest.

2