Does Closing a Bank Account Affect Your Credit Score?

Closing a bank account is a normal part of managing your finances. You might switch banks to find lower fees or better interest rates. If you’re planning to make a change, you may wonder, “Does closing a bank account affect your credit score?”

Closing an account doesn’t directly affect your credit. Your checking and savings accounts are not part of your credit report, so the act of closing one of them won’t hurt your financial profile. However, there are a few consequences to consider, especially if your account is overdrawn or in the negative.

Take a closer look at this important question, including some exceptions.

Does closing a bank account hurt your credit?

The short answer is no. Your credit score isn’t based on the age of your checking and savings accounts or who you bank with. The three major credit bureaus track information related to the money you borrow, which involves products like:

• Credit cards
• Auto loans
• Mortgages
• Student loans
• Personal loans

Opening or closing a bank account does not involve borrowing money, so the credit bureaus don’t report these changes.

When closing a bank account can indirectly affect your credit

Closing a checking or savings account can create financial complications if you aren’t careful. Your credit score may drop in the months following the closure of an account in certain scenarios.

Unpaid fees or negative balances are sent to collections

One of the biggest risks involves leaving an account with unpaid fees or a negative balance. For example, an automatic payment could be processed after you’ve stopped using the account, causing an overdraft. Some banks also charge monthly maintenance fees.

If you rack up a balance and don’t pay it, the bank may send the debt to a collection agency. Once that happens, the delinquent remark will decrease your credit score. Therefore, you need to keep a close eye on your bank account until it’s completely closed.

You forgot to adjust the automatic payment settings

Automatic payments are a convenient way to ensure your bills are paid on time. However, if you are enrolled in automatic payment programs that are linked to the account you close, and you forget to change them to a new account, you could miss bill payments. A single missed payment will hurt your credit score.

Closing the account reduces available funds for debt payments

If you don’t transfer your money properly or forget to switch your direct deposit to a new account, you could temporarily lose access to some of your money. Imagine a paycheck gets sent to the old account. While you sort out the mess with your old bank and your new one, it may be tough to cover all of your expenses.

How to close a bank account without affecting your credit

Sometimes, people need to close a bank account. If you find yourself needing to part ways with a bank or credit union, you can protect your credit with a few simple steps.

Pay off any outstanding balances or fees

If the account is in the green, you can withdraw or transfer your money and close it out. The process really is that simple. But if you owe the bank fees or need to make up for a recent overdraft, take care of those obligations before you close the account. It will be much easier to make those payments with an open account.

Move automatic payments and direct deposits first

Make a list of any direct deposits or automatic payments linked to the account you want to close. Move them to a valid account so that you don’t miss any paychecks or bill payments. A single late payment can have a huge impact on your credit score.

Confirm the account is closed in good standing

After you’ve jumped through all of the hoops, wait a few days and check back in with the bank. Verify that your account is closed and in good standing. Occasionally, some banks may charge fees for terminating an account or apply prorated charges when you close an account in the middle of a billing cycle.

What affects your credit score?

Closing a bank account usually won’t impact your credit score one way or the other. If you’re focused on building and protecting your credit, it’s more important to pay attention to the factors that actually influence your score. These include:

• Paying every bill on time
• Keeping your credit card balances low relative to your limits
• Maintaining older credit accounts
• Limiting when and how often you apply for credit
• Monitoring your credit report for errors

These behaviors directly impact your credit score. A better score and stronger financial profile can make it easier to obtain favorable rates when applying for financing in the future.

Does closing a bank account affect your credit score?

In general, closing a bank account won’t hurt your credit score. However, if your score has been damaged by other financial activity or you simply want to strengthen your financial profile, Kikoff can help. Our free and paid credit-building tools can add positive payment history to your financial profile. Sign up for a Kikoff credit account today.