Does Closing a Bank Account Hurt Your Credit?

There are many reasons for closing a bank account. You could be moving to another city where your current bank is not located. Maybe you have had continuous bad experiences with your current bank. No matter the situation, if you are planning on closing your bank account, be certain you manage the closure appropriately.

Significance

There is great significance to having a bank account. The bank can hold your money for you so that you don't have to keep large amounts of money on you. Banks also operate with the economy in that they provide loans to purchase homes or open a small business. Without your business, banks would not be in existence. This means everything will have to be paid with cash, even the purchase of a car.

Benefits

Bank accounts have many benefits for your personal finance, as well as your credit score. If you manage your money accordingly and pay the fees, your bank account will not negatively affect your credit score. However, if you bounce checks or don't pay the fees charged to you and then close your account, this can hurt your credit score. The bank can decide to use a debt collector to collect the money you owe. If this happens, it can go on your credit for five years and you may not be able to open a bank account with another bank.

Function

Keeping your bank account in good standing may not improve your credit score, but it can influence a creditor's decision to approve your credit application. Bank accounts do not show up on credit reports, but there is a Consumer Report, that can be obtained. It contains information about the handling of your bank account. If your bank account is shown positively in this report, this could be a plus for you.

Considerations

You should take some things into consideration before closing your bank account. Make certain all of the transactions performed using the bank account have been processed before you close the account. You don't want a debt to go unpaid or the bank to charge you overdraft fees because you closed the account before a transaction was paid. Also leave the bank on good terms. A creditor may want to not only check your credit report, but also personally talk to representatives from all of your banks, new or old.

Insight

You can get a copy of your own Consumer Report from the monitoring agency ChexSystems. You are entitled to one free copy yearly. You can also dispute information on this report if you do not disagree with it. To obtain a copy of your report, you can visit the ChexSystems website.