Does a Bounced Check Affect a Credit Score?

As people try to juggle payments, bounced checks may show up. Because credit scores are so important in getting new financing, it's a good idea to understand the impact bounced checks have on your credit score. Sometimes bounced checks don't hurt your credit score, but this depends on the person or group to which you wrote the check, as well as whether you cover the amount of the check quickly.

The Credit Status of Your Account

Checking accounts in banks function with money that you've deposited yourself. They thus aren't credit accounts the way loans and credit card accounts are. For this reason, banks do not report bounced checks to credit bureaus. From this standpoint, your credit score is safe regardless of how many checks you bounce.

ChexSystems

Even though banks don't report bad account activity to credit bureaus, they do track it. They report it to ChexSystems, a consumer reporting agency that monitors how you're managing your bank account. ChexSystems gives you a report just like credit bureaus do. Bounced checks show up on your ChexSystems report and lower your bank account management rating.

How Credit Scores and ChexSystems Connect

Creditors and lenders investigate your ChexSystems report just like they do your credit report. Some lenders don't look favorably on bounced checks. If they see too many, they may consider you a high risk and deny your credit application. This makes it harder to get financing, which means you may have trouble covering your expenses and debts. If you miss payments to service providers, credit card companies and other lenders -- a bounced check will count as a missed payment if you don't pay by other means by the due date -- those individuals and agencies will report the delinquencies on your accounts. That can make your credit score drop.

The Bottom Line

Bounced checks don't automatically lower your credit score. If you pay the debt associated with the check right away, the check recipient likely won't report your account as delinquent. If you ignore the bounced check, however, creditors and lenders may have no choice but to contact credit bureaus. If you think your check will bounce, contact the check recipient and alert him of the situation so you can arrange alternative payment methods or set up a payment plan agreement. You can avoid bounced checks by tracking your spending and income carefully, as well as using methods like refinancing and consolidation to manage your debt.