Will Closing Your Checking Account Affect Your Credit Score?

When it comes to closing and opening accounts things can get a little hazy. In fact, when it comes to what affects your credit score and what does not, things can get a little confusing as well. When does opening an account affect your credit? When does closing an account affect your credit? How long will it take your credit score to recover after opening or closing an account? Should you avoid certain things to better your credit score? Most importantly, will closing your checking account affect your credit score?

You may be thinking about closing your checking account for a number of reasons. Maybe you don’t agree with the costly fees that the bank charges. Maybe you have found an account that will better suite your needs. You may have even gotten married and are opening accounts with the bank that your significant other holds accounts with (it makes things a bit easier). Whatever your reason may be, you should know how making a change in your accounts will affect your credit score.

If you are seeking to close your checking account, it will not affect your credit score whatsoever. The only thing that closing a checking account will affect is your ability to open another account in the future. This is especially true if you close your account while it has a negative balance. This can also be the case if the bank is forced to close your account due to it being overdrawn. The way a bank account works can be a bit confusing. Let’s take a look at the details…

Banks do not report to credit bureaus. They do, however, report to something called the “ChexSystems.” The ChexSystems was created by banks and credit unions to help identify people who are not reliable to open accounts. This addresses people who abuse checking accounts, overdraw their accounts and then close them, or have multiple overdraws on accounts.

While your name will not be given to any credit bureau because of your bank account, it will be reported to the ChexSystems. This makes it difficult for you to open other accounts. There are a few reasons that your name would be reported:

• The bank was unable to collect an overdraft which they honored on insufficient funds
• Multiple overdrafts
• Abusing your account or ATM
• Any kind of false identification or fraud

You can also be reported to ChexSystems if you open and close accounts too often. If you are reported to ChexSystems, you can be prevented from opening a new checking or savings account through your bank or any other bank in the ChexSystems. If your name is reported to ChexSystems, you can expect to have that infraction on your history for up to five years. If you have more than one report on your name in the system, you will likely be unable to do any regular banking outside of “second chance accounts.”

It is important to keep your checking account in good standing. It is similar to falling into the “debt trap,” you don’t want to do it. When it comes to your banking, keep your nose clean and you won’t have any problems.

Photo: Flickr: GotCredit