Your credit score plays a crucial role in securing loans and credit cards, but many are left wondering: does my savings account balance affect my CIBIL score? Let’s break this down.
No Direct Link Between Savings and Credit Score
Credit scores, such as the CIBIL score, are based solely on your credit behaviour—how you manage borrowed money. This includes:
- Credit cards
- Loans
- Repayment history
- Outstanding balances
- Credit utilisation
- Number of inquiries
A savings account, on the other hand, is not a credit facility—you’re not borrowing money. Since there’s no debt involved, it doesn’t show up on your credit report and has no direct bearing on your credit score.
What Affects Your Credit Score?
Let’s explore the primary factors that influence your credit score:
1. Payment History
This is the most important factor. If you miss payments by more than 30 days, it negatively affects your score. Lenders report such delays to credit bureaus like CIBIL.
2. Credit Utilisation Ratio
This is the percentage of credit you use compared to your total available credit. High utilisation—especially near your card limit—may indicate financial stress and lower your credit score.
3. Credit Inquiries
There are two types:
- Soft Inquiry: Pre-approvals or personal credit checks. These do not affect your score.
- Hard Inquiry: Actual credit applications. These do affect your score, as they show you’re seeking new debt.
So, Can a Savings Account Help Indirectly?
While it doesn’t feature in your credit report, maintaining a healthy savings balance can indirectly support good credit behaviour:
1. Emergency Cushion
Savings can help you avoid relying on credit cards or loans during financial emergencies, thus keeping your credit utilisation low and score stable.
2. On-Time Repayments
A buffer in your savings account ensures you’re able to pay EMIs and bills on time, even during income disruptions. This helps in maintaining a positive payment history.
3. Strengthens Loan Applications
Lenders often assess your bank account to understand your repayment capacity. If you’re applying for a home loan, most banks prefer you to have at least 2 months’ worth of EMIs saved, improving your approval chances.
Conclusion
Your savings account balance doesn’t directly impact your credit score or CIBIL report. However, a robust savings habit contributes to stronger financial discipline, which supports positive credit behaviour over time.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.