Ask Money

Bank acounts, a credit card and rebuilding a credit score

Chris Farrell Feb 15, 2011

Question: I’m attempting to build my credit score, which is not in particularly good shape. The state to which I’m moving in a couple of months does not have any branches of my current bank (at which I have both checking and savings accounts). These are my only two bank accounts. I will need to open at least a checking account in my new town; should I open another savings account as well? Will it hurt my credit score too much to close my current bank accounts? (I’ll have to pay $8/month to keep them running, but won’t really using them where I’m moving. Keeping them open seems like it will only be a hassle.) Furthermore, I’m eligible for low-end credit cards right now (Capital One). Should I open one and use it to pay one bill a month (always paying it off within the grace period) in order to build my credit? Or does opening a low-end credit card not make sense?

My priority is my credit score, but for what it’s worth, I have no need for a credit card and would prefer to have just one checking and savings account (available in the town I’ll be living, as well as throughout other major cities). Any help would be much appreciated!!! Meg, Ann Arbor, MI

Answer: You’re fine. Go ahead and close the checking and savings accounts in your former town and open up new ones where you now live (or will live). The change in accounts won’t affect your credit score.

It reflects your record as a borrower, not as a bank customer. So, absolutely close the bank accounts you no onger need and find a good bank in town to do business.

I’m assuming by a “low-end” credit card you mean something along the lines of getting a secured credit card. It’s a classic way of restoring a credit score. I’ve written about secured credit cards and other options here.

The strategy of using a credit card you don’t need to, say, tpay for groceries or gasoline and then get rid of the whole tab at the end of the month is a sound way to build up a good credit score. You still live within your means–no credit card debt–and create a stong repayment history at the same time.

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