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.