Do savings affect credit score?

money-bagFor those trying to increase their credit score to qualify for a credit card or loan, a common question is whether having a good amount of money in a savings account will help. After all, having savings means you have the money to pay off debt, right? Shouldn’t that help your credit score?

The answer is no.

The amount of money you have in savings or in other accounts has no bearing on your credit score. According to Fair Isaac Corporation, the company that invented the credit score, these are the pieces that make up your credit score, with a rough percentage of the importance of each:

  • About 35% of your score is based on your past history of making payments on time.
  • About 30% of your score is related to the amount of debt you have, and how much debt you carry in relation to the credit lines that are available to you. (If you have a $10,000 credit line and have $5,000 on the card, it looks worse than if you have $5000 on a card with a $30,000 credit line.)
  • About 15% of your score is based on the length of your credit history, which obviously is not under your control. (Although if you think you’ll need credit later, it might be time to get a credit history started.)
  • About 10% of your score is based on the mix of your types of credit — if you’ve successfully managed a mortgage, a car payment, and a credit card, it shows you can handle your debt responsibilities.
  • Abut 10% of your score is based on how many new credit accounts you’ve opened in the recent past. If you just got 5 new credit cards, that may signal you’re a bigger risk, especially if you don’t have a long credit history.

Lenders will look at other factors in addition to your credit score, such as your annual salary, but the amount you have in savings will rarely factor in. Lenders want to know that you will pay your debts, and the best way to predict that is to see whether you’ve handled credit well in the past and/or whether you have sufficient income to make payments on an ongoing basis. Your savings, even if they are substantial, don’t help a lender predict your ability to pay over the long term. And, since your credit rating is based on your past ability to handle credit and not on your personal assets, savings have no bearing on your credit score.