Does Closing A Bank Account Affect Your Credit Score?
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Credit reports serve as a financial indicator for banks, financial companies, or landlords to proceed with providing the credit being applied for. Your credit score is used to determine your financial status. To get a loan, secure a low-interest mortgage rate, or invest in property, you must be deemed as creditworthy.
The good thing is that closing a bank account, be it savings; cheque; or debit, usually won't DIRECTLY affect your credit score.
Will Closing A Bank Account Affect Your Credit Score?
You will encounter serious problems if you close an account when you have overdraft fees. Although checking account overdrafts do not appear on your credit report, the banking report bureau “ChexSystems” constantly tracks all your banking account activity.
Any suspected fraudulent activity, bounced checks, unpaid fees, and overdrafts will indirectly affect your credit score. If applying for a new bank account, these reports may be reviewed, and your request could be denied. There are ways to fix this, but it is best to avoid the situation completely.
Closing a bank account with an overdraft, or any other outstanding debt may cause your credit score some damage, however, closing a bank account without any outstanding debts will have no adverse affects on your credit score at all.
Will An Overdraft Impact Your Credit Score?
If your overdraft remains unpaid, the financial institution has the right to sell your debt to debt collectors. Any amount, whether large or small, will remain on your credit report for seven years, and labeled as a “delinquency”.
How To Secure Your Credit Score
It’s simple! Keep your account in the green, because you want to be in the financial good-books of banks, and financiers. This is achieved by providing proof you are financially responsible.
Here are some tips to keep your credit score in the green.
- Organization: Ensure that you have paid off all credit loans timeously. Keep track of your transactions, balances, and interest rates.
- Credit utilization: Creditors advise that borrowers, or issuers (debtors) spend less than the 30% of their available credit at any given time.
- Credit mix: Having a diverse range of account types, such as revolving credit, and home equity loans, reveal your financial activity, and ability to manage payments.
Bottom Line
When closing a bank account with a zeroed balance and no outstanding obligations your credit score won't be impacted, however, closing an account with an existing debt, or overdraft will expose the consumer to potentially negative effects to their credit scores.
Consumers can consult credit specialists like Credit Sage for FREE! Allowing access to expert credit specialists to help consumers get their financial lives back on track.
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