Can a Bank Report You if You Owe Money on a Checking Account?

If you owe money for a bounced check, you might feel lucky to know that it will not affect your credit history unless you avoid repaying the debt. The financial institution won't report the delinquency to the credit bureaus, but someone else can should the bank sell off the account or file a lawsuit. Thus it is better to settle the matter as soon as possible.

Identification

Banking history, such as writing a check or owning different types of accounts, has almost nothing to do with a person's willingness to repay a debt, so the credit bureaus do not report banking history on a person's credit file. Instead, an overdraft can appear on a credit report as a collection account, but only if the bank sells it to a debt collector, according to Marcie Geffner of Fox Business.

Considerations

The bank does not have to sell the debt to a collection agency; instead it might pursue legal action for accounts where the unpaid balance outweighs the legal costs. A court case is likely to result in a public judgment, which damages your credit report, because the bureaus will probably find out about it. If a collection agency buys the debt, it too can pursue a judgment, which the bureaus can report.

ChexSystems Report

Most financial institutions report banking history to a company that is similar to the national credit bureaus: ChexSystems. Negative items such as bounced checks, fraudulent accounts and overdrafts go on a ChexSystems report for five years. Banks can reject a person's application to open account for just one item on her ChexSystems report. While bank accounts do not affect credit, a bank might close an account because of mismanagement of the account. Most lenders require at least one bank account for a loan or line of credit.

Tip

You can avoid overdrafting and bouncing checks by always keeping tabs on your checking account balance. Also, link your savings account to your checking account for added protection -- the bank will draw on the savings in case of an overdraft. If you do not have a savings account, most banks offer overdraft protection. Overdraft protection usually requires a credit check, which dings your credit score a few points, but this is insignificant compared to what a collection account or judgment can do to a credit score.