By Sabrina Karl

Certificates of deposit are great for stashing away money reserved for buying a home, since their withdrawal restrictions make them harder to access than other bank accounts. But can CDs actually help you qualify for a mortgage? And how do they impact your credit score?

Let’s start with your credit report. Here, the answer is that CDs have no bearing on how good you look to credit rating agencies. That’s because credit scores generally only factor in credit that’s been extended — in other words, your loans, debts and credit lines.

In contrast, bank accounts and investments are savings, not debt obligations, and therefore don’t fall within a credit report’s scope. So no matter how much money you hold in deposit at a bank, whether in CDs or other accounts, it won’t appear in your credit report or factor into your score.

The only exception is for individuals who use a CD as collateral to take out a personal loan. Here, credit has been extended, so the personal loan will make it onto your credit report.

As for how CDs influence mortgage lender decisions, any funds held in certificates can certainly count toward your down payment. But whether your down payment funds come from savings, money market, checking or CD accounts really doesn’t matter. Cash in any of these is calculated equally.

Because CDs are not as liquid as savings accounts, though, the lender may require you to spell out when you’ll cash in the certificates, and perhaps how much you’ll surrender in any early withdrawal penalties.

Other than that, however, owning CDs will not sway the lender to be any more or less favorable to you, making their best value that of securely holding your funds with reduced temptation until you’re ready to apply them to your new home.