Does Closing a Checking Account Hurt Your Credit?

A checking account manages daily finances, allowing for deposits, withdrawals, and payments. A credit score, in contrast, is a numerical representation of an individual’s creditworthiness, primarily reflecting their history of borrowing and repaying debt. The direct act of closing a checking account does not typically affect your credit score, as these accounts are fundamentally different from credit products.

Checking Accounts and Your Credit Report

Checking accounts are deposit accounts, not credit accounts. They are designed for managing liquid funds and facilitating transactions, rather than extending credit. This distinction is important because the three major credit bureaus—Equifax, Experian, and TransUnion—collect and maintain information primarily related to credit products. These products include loans, such as mortgages and auto loans, and credit cards, where repayment history is tracked.

Activity within your checking account, including opening or closing it, is generally not reported to these credit bureaus. This means that closing a checking account in good standing will not appear on your credit report and will not directly influence your credit score. Credit reports are records of how you manage borrowed money, and since checking accounts do not involve borrowing, they are excluded from this reporting.

Potential Indirect Credit Implications

While closing a checking account does not directly impact your credit score, certain circumstances can lead to indirect negative consequences. One such scenario involves closing an account with an outstanding negative balance. If a checking account is closed with an unpaid negative balance, the financial institution may send this debt to a collection agency. A collection account will be reported to the credit bureaus and can significantly harm your credit score, potentially remaining on your credit report for up to seven years.

Another indirect implication arises from missed payments on financial obligations. Many individuals link automatic payments for credit cards, loans, or other bills to their checking accounts. If these automatic payments are not updated to a new account before the old one is closed, they will fail. Missed payments are reported to credit bureaus and can reduce your credit score, as payment history is a significant factor in credit scoring models.

Steps for a Smooth Account Closure

To avoid indirect negative impacts on your credit score, careful planning is essential when closing a checking account. First, compile a list of all direct deposits and automatic payments linked to the account. This includes paychecks, utility bills, subscriptions, and loan payments. Ensure these arrangements are transferred to your new bank account before closing the old one.

Next, confirm that the account balance is zero or positive before initiating the closure. This involves ensuring all pending transactions have cleared and no outstanding fees or charges remain. After the account is closed, request written confirmation from the bank. This documentation serves as proof that the account was closed in good standing. Continuously monitoring your credit report for several months after closure can help identify and rectify any unexpected issues that might arise.