Does an NSF Affect Your Credit?

An NSF check is a check written on an account that has non-sufficient funds to cover the check. Banks may refuse to open a new account for you because they use a service called ChexSystems, which reports such activity. Lenders check with the Experian, Equifax and TransUnion credit bureaus, which do not directly report NSF checks, but your credit may still be affected indirectly.

Credit Reports

Your credit reports show all your current credit-related accounts and old accounts going back at least seven years. Entries include branded credit cards and cards from gas stations and retail stores, loans, mortgages and equity credit lines. Your reports list your payment history for every account, as well as such actions as charge-offs, transfers to collection agencies, court judgments for debt and bankruptcies. The credit bureaus do not list your checking account activity, so your NSF checks do not show up. Your credit score comes from the report information, so bounced checks do not affect it.

Collection Activity

Merchants to whom you write bad checks may turn them over to collection agencies if you do not respond to demands for payment. Debt collectors can add such accounts to your credit reports, so collection agency information related related to NSF checks can affect your credit if it gets reported to the credit bureaus. Collection accounts fall into the payment history category, which accounts for 35 percent of your credit score total. Such accounts can legally show up on your reports for seven years.

Judgments

Collection agencies may decide to sue you for NSF checks if your state's laws allow them to do so, and if the owed amount is high enough to make it profitable. Judgments happen when you get taken to court and the judge rules in the debt collector's favor. These actions are public records that show up in court files and eventually get added to your credit reports. They make you look bad to lenders who review your credit reports. Judgments also become part of your payment history and pull down your credit score for the seven years they can legally be included in your records.

Warning

You may create court records because of a bounced check if charges are filed against you and you are found guilty of an NSF-related crime. Many states have criminal penalties for making payments with bad checks, and Steve Bucci of Bankrate.com warns that court records of convictions can show up in background checks forever. Lenders generally limit themselves to credit checks, but employers may check both your credit reports and your background, so the NSF check could cost you a job.