Closing a bank account that’s in good standing won’t affect your credit score. Closing a bank account with a negative balance that is sent to collections could have an effect on your credit.
Closing a bank account wont directly affect your credit. That could, however, be closed with a negative balance, which could cause you problems and lower your credit score. Heres what to know about bank account closures and your credit score.
The short answer is no closing a bank account in good standing won’t directly affect your credit score. However there are a few scenarios where it could indirectly impact your credit. Let’s dive deeper into the details.
What Information Shows Up on a Credit Report?
Your credit report is a detailed record of your financial history, including your credit accounts, payment history, and outstanding debts. It’s used by lenders to assess your creditworthiness and determine your eligibility for loans and credit cards.
Bank account information however, is not included in your credit report. This means that simply closing a bank account won’t directly impact your credit score.
Indirect Impact on Credit Score
Although the act of closing a bank account has no direct effect on your credit score, it may have some indirect effects:
- Negative Balance: If you close a bank account with a negative balance, the bank may send the debt to collections. This collection account could then be reported to the credit bureaus, potentially lowering your credit score.
- ChexSystems: Closing a bank account with a negative balance could also be reported to ChexSystems, a reporting agency that tracks your banking history. This could make it difficult to open a new bank account in the future.
How to Safely Close a Bank Account
It’s crucial to securely close your bank account to prevent any potential harm to your credit. Here are a few tips:
- Ensure a Zero Balance: Before closing your account, make sure you have a zero balance. This means paying off any outstanding debts and transferring any remaining funds to another account.
- Consider Outstanding Transactions: Allow some time after closing your account to ensure no pending transactions could cause a negative balance.
- Contact the Bank: If you’re unsure about anything, contact the bank directly for guidance.
Monitoring Your Credit is Crucial
While closing a bank account won’t directly impact your credit, it’s still important to monitor your credit regularly. This will help you identify any potential errors or negative marks on your report and take steps to correct them.
Building Good Credit Habits
You can create a solid credit history that will serve you well in the long run by managing your credit responsibly. This entails avoiding needless debt, maintaining a low credit utilization rate, and paying your bills on time.
Additional Resources
For more information on credit and credit scores, check out these resources:
- NerdWallet: https://www.nerdwallet.com/article/banking/does-closing-a-bank-account-hurt-your-credit
- Experian: https://www.experian.com/blogs/ask-experian/does-closing-a-bank-account-affect-your-credit/
Remember, closing a bank account in good standing won’t hurt your credit score. However, it’s important to be aware of the potential indirect impacts and take steps to avoid them.
Does Bank Account Information Show Up on a Credit Report?
Your bank account information is not listed on your credit report because banks and credit unions do not submit it to Equifax, TransUnion, and Experian, the credit reporting agencies. Account closures are not recorded on your credit report, even if the financial institution or you closed the account.
Regardless of the assets you have available, your credit score is determined by the data in your credit reports, which represents how you handle paying off debt. As such, theres no direct link between your checking, savings or money market accounts and your credit scores.
How Closing a Bank Account Can Affect Credit
Although closing a bank account won’t directly affect your credit, it might have an indirect effect if the account had a negative balance when it was closed.
In this instance, the bank or credit union may send your debt to a collection agency if you fail to make your payments on time. Your credit score may suffer significantly if the agency decides to report the collection account to the credit bureaus.
Furthermore, whether or not you settle the collection account, it will stay on your credit report for seven years following the original delinquency date.
An overdraft bank account that has been closed may potentially damage your credit score in addition to being reported to ChexSystems, the company that maintains your banking report. A banking report is similar to a credit report, but it only contains details about your recent and historical banking activity.
Leaving the account closed with a negative balance could make it more difficult for you to be approved for a traditional bank account later on, regardless of whether you or the financial institution closed the account. If this happens, you may need to opt for second-chance bank accounts or prepaid debit cards.
Will CLOSING A Bank Account HURT Your Credit Score?
FAQ
Is there a downside to closing a bank account?
How much will my credit score drop if I close an account?
Does it hurt your credit if a bank closes your account?
Does closing a bank account affect credit history?
Does closing a bank account affect your credit score?
Your credit score is based on how you manage borrowed money, and your checking or savings accounts aren’t debts. So bank account closures aren’t reported to the three major credit bureaus: Experian, TransUnion and Equifax. However, having a negative balance when the account is closed could negatively impact your credit score.
What happens if you close a bank account?
The company that buys the debt can then report the collection account to the credit reporting companies, which could cause scores to plummet. When closing a bank account, you should contact your bank to ensure that all withdrawals have cleared, and that no money is owed. Take inventory of any pending payments that may not have cleared yet.
What happens if you close your bank account with a negative balance?
If you use an out-of-network ATM, you may have to pay a fee to withdraw money. Closing your bank account with a negative balance could indirectly affect your credit score. If you need to close your bank account for any reason, follow the steps above to ensure you do it correctly and don’t leave a stain on your credit report.
What happens if you close an account on your credit report?
Account closures are also absent from your credit report, regardless of whether you or the financial institution closed the account. Your credit score is based on the information found on your credit reports, and reflects how you manage your debt payments, regardless of what assets you have available.