Your bank account information doesn't show up on your credit report, nor does it impact your credit score. Yet lenders use information about your checking, savings and assets to determine whether you have the capacity to take on more debt.
When applying for loans and/or credit cards, lenders first look at your credit score and credit report to see your open and closed credit accounts and loans, as well as details about your payment history. From this, they can also tell how much available credit you have, how much you're using, if you've had any debt go to collections and the number of soft or hard inquiries on your account within the past two years.
But the credit report leaves out some important data: According to Experian, "information about assets such as checking account balances, savings account balances, certificates of deposit, individual retirement accounts, stocks, bonds or other investments" are not listed in your credit profile.
This is where your bank statements come into play.
Below, Select explains why getting your bank account information in order can help you the next time you apply for credit.
Why lenders might ask for more information
Banks and lenders look at everything from your car loan to your mortgage when you apply for new credit because they need to assess your capacity to pay your bills.
While this is standard with mortgage lending, auto lending and sometimes even personal loans, it might also come up when you apply for a new credit card. Because of the high unemployment rate and general economic uncertainty, card issuers are tightening requirements on credit card approvals and looking at your income documentation as well as your credit score to see if you qualify.
What information lenders will ask for
When applying for a loan, a mortgage or a credit card, lenders will ask for your salary and income because these metrics measure how much money you have, or your capacity to make monthly payments. They may want to see proof such as recent pay stubs, tax returns, W-2 forms, direct deposit and/or bank statements.
For a sizable loan like a home mortgage or business loan, lenders will take a closer look at a borrower's assets. These assets can include your cash, such as your checking accounts, savings accounts and CDs. They can also include investment assets, like your retirement accounts, stocks and bonds. Properties and material assets might also be taken into consideration, and you'll need to show documentation of the appraised value if you're planning to use them as collateral.
How lenders assess what a good candidate is
A lender or card issuer will assess how reliable you are as a potential borrower by looking at the overall picture: your credit history, your credit score, your income and your various cash and investment assets. A low debt-to-income ratio and a history of steady paychecks will help your case in getting approved for new credit because they demonstrate both your capacity to take on debt and the likelihood that you will repay it. Lenders look for expenses like monthly housing payments and the total of your minimum payments across all accounts to get an idea of how much you owe every month, versus what you bring in.
If you are looking to apply for a credit card but unsure how your income stacks up, consider a secured credit card. Those with less-than-stellar credit and inconsistent income could have a better chance of qualifying for these cards because they have more flexible income requirements. With a secured card, you put down a refundable deposit upfront, which acts as your credit limit, and you build your credit score by paying your balances off on time and in full.
Some of Select's top picks for secured credit cards are below.
- Best low deposit: Capital One Platinum Secured Credit Card (See rates and fees)
- Best for high credit limit: Platinum Secured Mastercard® from First Tech Federal Credit Union
- Best for low interest from a major bank: Citi® Secured Mastercard®
- Best for low interest from a credit union: DCU Visa® Platinum Secured Credit Card
- Best for traveling abroad: SDFCU Savings Secured Visa Platinum Card
Bottom line
When it comes to applying for new credit, your credit history and credit score are definitely important but they make up just one factor of your application.
To show lenders that you have the ability to repay your debt, be prepared when you apply for a new loan or credit card. Have these financial resources ready to go and know your credit score going in. Doing so can open access to credit and put you on a path to a healthy financial future.
Information about the Platinum Secured Mastercard®, DCU Visa® Platinum Secured Credit Card, and SDFCU Savings Secured Visa Platinum Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
