Does Closing a Bank Account Affect Your Credit Score?

In most typical situations, closing a standard checking or savings account does not directly impact one’s credit score. Credit scores primarily reflect borrowing and repayment behavior, rather than the management of deposit accounts.

Understanding Bank Accounts and Credit Scores

Checking and savings accounts are deposit accounts for holding and managing your money. Banks do not view these as credit products.

A credit score measures your creditworthiness based on your history of borrowing and repaying money. Major credit bureaus like Experian, Equifax, and TransUnion generate this score by tracking credit cards, loans, and other borrowed money.

Since checking and savings accounts are not credit products, their opening or closing is generally not reported to major credit bureaus. Your credit report details debt obligations and repayment patterns, not deposit account status. Therefore, closing a bank account does not appear on your credit report or directly influence your credit score.

Indirect Impacts and Common Misconceptions

While closing a bank account itself does not directly affect your credit score, certain circumstances surrounding its closure or your banking behavior can have indirect consequences. One significant indirect impact arises from unpaid overdrafts or negative balances. If a bank account is closed with an outstanding negative balance that is not repaid, the bank may send this debt to a collection agency.

Once a collection agency receives the debt, they can report it to the major credit bureaus. This action would then appear as a collection account on your credit report, which can substantially lower your credit score. Such a negative mark can remain on your credit report for up to seven years from the date of the original delinquency, even if the debt is eventually paid.

Another scenario involves bank accounts linked to credit products. If your bank account is used for automatic payments for loans, credit cards, or other lines of credit, closing the account without updating these payment methods can be problematic. Missed payments on credit obligations, resulting from failed automatic deductions, are reported to credit bureaus and will negatively affect your credit score.

Distinguish between traditional credit bureaus and specialty consumer reporting agencies like ChexSystems. ChexSystems collects information about consumers’ deposit and debit account history, including overdrafts, unpaid fees, and suspected fraudulent activity. While a negative report to ChexSystems can make it difficult to open new bank accounts, it does not directly impact your FICO or VantageScore credit scores.

Steps for Closing a Bank Account

To avoid indirect negative impacts on your credit, follow several steps when closing a bank account. First, update all automatic payments and direct deposits. Ensure that any recurring bill payments, subscriptions, or income (like paychecks or government benefits) are redirected to a new account before closing the old one.

Next, carefully review your account for any pending transactions that might still clear. This includes checks you’ve written that haven’t been cashed or payments scheduled to process. Allow sufficient time for all such transactions to clear to prevent any overdrafts or unexpected negative balances.

Once all transactions have cleared and automatic payments are rerouted, transfer any remaining funds from the old account to your new one. You can typically do this through an electronic transfer, or the bank may issue you a check for the remaining balance. Finally, obtain written confirmation from the bank that the account has been officially closed and holds a zero balance. This documentation provides proof of closure for your records.