Does a savings account directly affect your credit score?

An excellent credit score of 750 and above is essential today. Why, you ask? Because your score directly impacts loan approvals, interest rates, and processing charges, influencing how easily and affordably you can access credit.

While a savings account doesn’t directly affect your credit report, it plays a crucial role in shaping your overall financial discipline, which in turn supports a healthy credit profile. Curious how that works? Read on to find out how your savings habits can quietly boost your creditworthiness.

Does a savings account directly affect your credit score?

Your score is computed by credit bureaus like CIBIL or Experian that review your loan and credit card repayments, your past credit record, credit utilisation ratio, and credit mix. Savings accounts being a non-credit financial option, do not have any direct credit score impact.

But completely dismissing the role of a savings account in building and maintaining your credit score would also be incorrect. A smartly managed savings account is the foundation of sound financial habits that indirectly support your credit health.

Here are some indirect ways a savings account can help build your credit score:
 

1) Promotes financial discipline
 

Regular savings promote budgeting habits and lower dependency on credit for emergencies. A financially disciplined individual is likely to repay debts in full and on time. This positively impacts their credit score over time.

2) Increases access to linked products
 

A healthy savings account can open doors to linked products like secured credit cards, which are backed by your deposit and reported to credit bureaus. These tools are especially useful for building or rebuilding your credit score over time.

3) Reflects stability in financial relationships
 

Financial institutions might consider the consistency and longevity of your savings account while offering any form of credit. A strong and active relationship can result in better loan terms or pre-approved offers.

How to use savings accounts to improve credit score
 

While a savings account itself does not directly influence your credit score, you can use it in combination with other strategies to help improve your credit score. Here are some ways you can leverage a savings account to positively impact your credit score:

1) Build an emergency fund
 

By building an emergency fund in your savings account, you can avoid relying on credit cards or loans in case of unexpected expenses. This can help prevent high levels of debt, which can negatively affect your credit score if not managed properly.

2) Avoid unnecessary withdrawal of funds
 

Frequent bank withdrawals indicate financial instability. Make sure you build the habit of fund preservation. Doing so will allow you to have adequate savings in your account, which you can use to repay your dues on time and in full.

3) Use your bank account to set up auto repayments
 

Set up auto deductions for the payment of loan Equated Monthly Instalments (EMIs) and utility bills. Timely repayment of dues help keep your score high.

4) Go for the right savings account
 

An ideal savings account offers value-added banking benefits that enhance your financial journey, such as:

• Zero-fee banking on all standard savings account services
• Zero charges on debit card, IMPS, SMS alerts and more
• High interest rates
• Monthly interest credits, which help in leveraging the power of compounding.

Alternative ways to build credit score without a savings account
 

If you are beginning from scratch, you can still build a credit score through:

• Secured credit cards backed by fixed deposits
• Timely and full repayment of loans and credit card dues

While these methods may improve your credit score, pairing them with responsible savings can amplify outcomes.

Conclusion
 

A savings account might not directly impact your credit score, but it lays the basis for responsible financial behaviour. By encouraging consistent saving, supporting linked credit products, and enabling stable banking relationships, a savings account plays a quiet but powerful role in credit health.

Selecting a high-value option like the IDFC FIRST Bank Savings Account can enhance both your returns and your readiness for future credit needs.