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Will Closing a Bank Account Affect Your Credit?

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Banks and credit unions dont report bank account information, including closures, to the credit bureaus. However, closing an account may have an indirect impact on your credit in a few scenarios.

Closing a bank account doesnt hurt your credit, at least not directly. However, there are some instances where closing an account could result in an impact to your credit score.

If you closed a bank account recently or are thinking about it, here’s what you need to know about what might happen and how you can avoid it.

You may be considering closing a bank account for any number of reasons – switching banks, consolidating accounts, or simply no longer needing it. But before you close that account, you might be wondering – will it affect my credit?

The short answer is, closing a bank account does not directly impact your credit scores. However, there are some indirect ways that closing an account improperly could hurt your credit In this article, we’ll explain how bank accounts relate to your credit, when closing an account could affect your scores, and how to close an account without damaging your credit

How Bank Accounts Relate to Your Credit

First, it’s important to understand the relationship between bank accounts and your credit reports and scores

Your credit reports, maintained by the three major credit bureaus, Experian, Equifax, and TransUnion, track your history managing credit – including credit cards, loans, mortgages, etc. Your credit scores are calculated based on the information in your credit reports.

Your bank account history and activity is not reported to the credit bureaus. Things like opening or closing accounts, deposits, balances, or overdrafts are not included in your reports.

So closing a bank account does not directly impact your credit. The act of shutting down an account itself will not show up or hurt your credit.

There are, however, some indirect ways that closing an account could hurt your scores, which is what we’ll talk about next.

When Closing a Bank Account Could Hurt Your Credit

While the account closure alone won’t hurt your credit, there are some scenarios in which closing an account could lead to credit report damage:

  • The account has a negative balance – If you close an account that has a negative balance due to overdrafts and fees, the bank may send the debt to collections. That collection account could then be reported to the credit bureaus and lower your scores.

  • You miss a loan payment – If automatic payments for a loan, mortgage, or credit card are withdrawn from the account, closing it without switching over the payments could result in a missed payment and credit damage.

  • You have a relationship with the bank—Some banks may look favorably on credit card or loan applications from people who already have an account with them. Closing your accounts could remove this potential advantage.

The key is avoiding these pitfalls when you close your account. We’ll explain how next.

How to Close an Account Without Hurting Your Credit

Closing your account properly involves a few simple steps to protect your credit scores:

  • First, open a new account. Get a new account ready at a different bank so you have a place to move your money and bills.

  • Transfer automatic payments – Update any bills, subscriptions, or automatic loan payments to come out of your new account.

  • Balances must be paid off in full before the account can be closed. This includes any overdrafts or negative balances.

  • Confirm account closure – Request written confirmation from the bank that your account is fully closed with no other pending actions.

Following this checklist will allow you to seamlessly switch banks and accounts without any unintended hits to your credit.

If you do get a collection account on your credit report from a closed bank account, you can dispute the item with the credit bureaus to potentially get it removed. Paying off the negative balance won’t remove it from your credit reports, but some newer credit scoring models may ignore paid collections when calculating your scores.

Closing Joint Accounts

If you share a bank account with another person, such as a joint checking account with your spouse, extra steps should be taken when closing the account to avoid issues.

Both account holders should agree in writing to close the joint account. Any remaining funds should be withdrawn and distributed evenly, or as agreed upon. The other account holder should also be notified so automatic payments can be switched to a new account if needed.

With joint accounts, you’ll likely need to visit a branch or mail in a form to complete the closure, rather than closing it online. This ensures the bank receives authorization from both account holders.

Alternatives to Closing an Account

If you don’t want to fully close your bank account, here are some other options to consider:

  • Switch to a free, basic checking account to avoid monthly fees
  • Negotiate with the bank to waive or reduce fees on your existing account
  • Keep the account open but minimize activity to avoid dormancy fees

This allows you to preserve your relationship with the bank and account history while reducing costs.

When Is Closing an Account a Good Idea?

While closing a bank account doesn’t directly hurt your credit, there are plenty of good reasons you may want to do so. Here are some of the most common:

  • You’re moving, and your bank doesn’t have branches in your new area
  • Your bank charges high monthly fees or overdraft fees
  • You find a new bank offering better interest rates or lower fees
  • You no longer need multiple accounts and want to consolidate
  • You’re unhappy with the bank’s customer service

As long as you close properly by settling balances, transferring payments, and confirming account closure, you can switch banks or consolidate accounts without credit concerns.

The Bottom Line

While bank accounts aren’t directly connected to your credit, there are some roundabout ways that closing one improperly could ding your credit scores. As long as you close an account responsibly by paying balances, switching payments, and confirming closure, your credit shouldn’t be affected. But take precautions when closing joint accounts or ones with overdrafts.

Closing a bank account is a common occurrence when people move, switch banks, or consolidate finances. By understanding the relationship between bank accounts and your credit, you can take steps to ensure account closure doesn’t hurt your credit scores.

will closing bank account affect credit

Does Bank Account Information Show Up on a Credit Report?

Banks and credit unions dont report your bank account information, including closures, to the credit reporting agencies (Experian, TransUnion and Equifax). As a result, any bank account you open or close wont be listed on your credit report.

Your credit reports are a record of how you manage your debt payments. Since your checking, savings and other deposit accounts are not reflected in your credit reports, theres no direct link between them and your credit scores.

You Have a Negative Balance

If you close the account with a negative balance and dont pay off the debt you owe in a timely manner, the bank or credit union could send it to a collection agency. The agency may choose to report the collection account to the credit bureaus, which can have a significant negative impact on your credit score.

Whats more, the collection account will remain on your credit report for seven years from the date of the original delinquency, even if you pay it off. Newer credit score models may ignore paid-off collection accounts when calculating your credit scores, however.

Will CLOSING A Bank Account HURT Your Credit Score?

FAQ

Will closing a bank account affect my credit score?

If you have a negative balance with the bank, you’ll want to resolve that balance before closing the account. Negative bank balances and missed payments on credit cards tied to the bank account will affect your credit score. Will closing unused bank accounts help my credit score?.

Can closing a bank or credit union account hurt your credit score?

If you want to close a bank or credit union account but also have a checking or savings account, you may be wondering if that will hurt your credit score. After all, a low credit score can make getting a home, car, or personal loan difficult and may cause future credit card applications to be rejected.

What happens if a creditor closes your account?

How a Creditor Closing Your Account Can Hurt Your Credit When an account is closed, , which impacts your credit-utilization ratio — the amount you owe as a percentage of your total available credit. This ratio accounts for 30% of your credit score. Keeping your balances around 30% or less of your available credit is best.

Can a closed credit card affect your credit score?

As TransUnion and Experian note, a closed account that shows a positive history of payments is likely to help your credit score. Generally, a closed account with negative history can continue to hurt your credit score for seven years. Is it good to have a zero balance on credit cards?.

What happens if a bank account is closed?

Negative Marks: If the account was closed due to delinquency or other negative factors, these marks can remain on your credit report for up to seven years, potentially lowering your score. Positive Side: The good news is that the impact of a closed account diminishes over time.

Should you close a bank account after opening a new account?

Close the old account. The old bank account should not be closed for at least a month after the new one is opened. That way, you can check that your direct deposit went through correctly and that all of your automatic bill payments were sent. Closing a bank account that’s in good standing won’t hurt your credit score.

Will closing a bank account affect credit score?

Closing a bank account generally does not affect your credit score directly, as checking and savings accounts are not considered credit accounts.

Is there a downside to closing a bank account?

Closing a bank account generally doesn’t hurt your credit score if the account is in good standing.

How badly does closing an account hurt your credit?

Closing one credit card account likely won’t make a big enough dent to hurt your chances of approval with future lenders, especially if you’ll still have another form of revolving credit open, but it’s worth being mindful of this if you want the highest credit score possible.

Does closing a bank account delete history?

Banks are required by federal regulations to retain certain account records, such as checks and electronic transfers, for set timeframes after an account is closed. For checks, this retention period is 5 years. Beyond those minimums, banks will often keep records of closed accounts for 7-10 years after closure.

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