Account overdraft occurs when you spend more money than is present in your account. Overdrafting has many negative effects on your finances. In addition to extended overdraft fees, overdrafting your checking or savings account could impact your credit score.
Effects
Overdrafting your bank account puts your account into delinquent status. If you do not have the overdraft reversed or pay off the negative balance, your account will be closed, charged off and sent to collections. In addition, many banks will report you to ChexSystems, a company that keeps a database of charged-off accounts.
Considerations
Although overdrafting your account does not directly affect your credit score, if not quickly resolved, it can damage your credit history. If your account was charged off due to overdraft, it will show up on your credit report as a collection account. Collection accounts lower your credit rating significantly, according to MSN.
Time Frame
Banks will typically send you an overdraft notice within seven days of your account going into the negative. Typically, if you do not bring your account to a positive balance, your bank will close the account 30 days after the overdraft.
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