No, closing a bank account typically does not hurt your credit score, as bank accounts are not directly linked to your credit report in the same way credit cards or loans are. However, there are crucial exceptions where it could indirectly have a negative impact.
When Closing a Bank Account Won't Affect Your Credit
If your bank account is in good standing—meaning you have no outstanding fees, overdrafts, or negative balances—closing it will not appear on your credit report or negatively impact your credit score. Your credit history primarily tracks borrowing and repayment behavior, not the status of your checking or savings accounts.
When It Can Indirectly Affect Your Credit
While the act of closing a bank account itself isn't a credit event, problems associated with the account can affect your credit score. This usually occurs under specific circumstances:
- Negative Balance: If you close an account that has a negative balance or an outstanding overdraft, the bank may send that debt to a collections agency. A collection account can significantly damage your credit score and remain on your credit report for up to seven years.
- Missed Payments on Linked Credit Products: If your bank account is tied to other credit products, such as an overdraft line of credit, a linked credit card, or a personal loan, and you miss payments on those products, those missed payments will be reported to credit bureaus and negatively affect your score. This isn't due to closing the bank account, but rather the failure to manage associated debt.
- ChexSystems Record: While not directly a credit score impact, banks often use services like ChexSystems to screen potential customers. If you close an account with a negative balance, bounce checks, or engage in other problematic banking behavior, it can be reported to ChexSystems. This record can make it difficult for you to open new bank accounts in the future, even if it doesn't directly affect your FICO score.
Scenarios: Bank Account Closure and Your Credit
Here’s a quick overview of how different situations might play out:
| Scenario | Impact on Credit Score |
|---|---|
| Account in good standing (positive/zero balance) | No impact. Your credit score remains unaffected. |
| Account with negative balance (unresolved) | Potential negative impact. Debt may go to collections. |
| Missed payments on linked credit card/loan | Negative impact. Missed payments are reported to credit bureaus. |
Steps to Take Before Closing a Bank Account
To ensure a smooth transition and protect your credit, consider these steps:
- Clear All Balances: Ensure your account has a zero or positive balance. Pay off any outstanding overdrafts, fees, or negative balances.
- Transfer Direct Deposits and Automatic Payments: Before closing, update all your direct deposits (like your paycheck) and automatic bill payments (utilities, subscriptions, loan payments) to your new bank account. This prevents bounced payments and potential late fees that could indirectly hurt your credit.
- Confirm No Linked Debt: Verify that there are no credit cards, lines of credit, or loans directly tied to the bank account you wish to close that require specific payment arrangements from that account.
- Monitor Your Old Account (Initially): After closing, it's wise to monitor your previous financial statements or online banking access (if available) for a short period to ensure no unexpected charges or issues arise.
- Obtain Confirmation: Request a confirmation in writing from the bank that the account has been successfully closed and that there are no outstanding liabilities.
Closing a bank account is a straightforward process that, when handled responsibly, will not harm your credit standing. The key is to resolve any financial obligations with the bank before initiating the closure. For more information on banking and credit, you can consult reliable financial resources such as Bankrate.
