If you make an error and overdraw your bank account, you will owe the bank the amount you overdrew in addition to any fees your bank charges for the overdraft. If you fail to pay the bank what you owe, you may suffer damage to your credit.
Facts
Banks do not report consumer checking accounts to the credit bureaus. Because of this, if you pay the amount you owe to the bank promptly, your credit will be unaffected.
Considerations
After repeated attempts to collect the debt you owe proves unsuccessful, your bank may turn the unpaid debt over to a collection agency. This usually occurs after 180 days.
Features
A collection agency will report the amount you owe to the credit bureaus as a derogatory debt. Doing so will result in your credit score dropping.
Effects
A collection agency may attempt to sue you for the amount you originally owed to the bank in addition to collection fees and court fees. If the lawsuit is successful, a judgment will appear on your credit report that will cause additional damage to your credit score.
Time Frame
The Fair Credit Reporting Act states that a collection account and a judgment can both remain within your credit history for seven years. Both entries will have a negative effect on your score until they are removed.
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