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Whether your bank account has fees or you’re finding that your account is surplus to requirements, you may have thought about closing it. However, one concern that you may have is whether it will hurt your credit to close your bank account.
Does it Hurt Your Credit to Close a Bank Account?
If you’re considering closing a bank account, you should feel reassured that the process of closing your account will not have a direct impact on your credit.
The three major credit bureaus; Equifax, Experian and TransUnion typically don’t include your checking account history when compiling credit reports.
This means that even if you’ve held your checking account for years, it will not affect the average length of your credit history or impact the other criteria used to calculate your credit score.
However, you do need to be careful about how and when you close your bank account, so you don’t trigger any impact on your credit.
Does Bank Account Information Show Up On a Credit Report?
When you apply for credit cards, loans or other credit products, lenders will look at your credit report to see details of your payment history and how you handle your finances. However, your bank account information does not actually appear on your credit report.
This may seem strange since potential lenders do use information about your checking accounts and assets to determine if you have the capacity to handle more debt.
Information about your assets including your checking and saving account balances, CDs, and investments are not available to lenders when they pull your credit report. This is why you tend to need bank statements and proof of income to support your credit applications.
When Does Closing a Bank Account Hurt Your Credit?
While your bank account details are not typically reported on your credit history, there are some circumstances where closing the account could negatively impact your credit. These include:
- Owing a Negative Balance: If you close your account, while you have a negative balance and fail to repay the debt, there is a chance it will be reported to a third party collection agency, which would then appear on your credit report.
- If the Bank Closes Your Account: If you have not decided to close your account, but rather the bank has closed the account due to being overdrawn for an extended period or another negative account management reason, this could appear on your credit report.
- You’ve Not Paid Outstanding Fees: When you close your account, you may have withdrawn any remaining funds and not considered any fees yet applied to your account. If you don’t settle these fees and the bank sends the debt to a collection agency, it may be reported on your credit report, and it's difficult to remove it then.
What To Do Before Closing a Bank Account
Before you close your bank account, you need to ensure that you have proper provisions in place to replace the account. You’ll need to move over any auto pay bills, salary payments and other transactions over to a new account.
It is also a good idea to wait until you have a debit card for your new account, so you can fully use your new account before you lose the facilities of your old account.
If you want to close your bank account, you can’t simply cut up your debit card and forget about the account. Even if there is no money going in and out of the account, it will remain open and could create a potential issue for your financial health in the future.
How to Close a Bank Account Safely
If you want to close your bank account without impacting your credit, there are several steps to ensure that the account remains in good standing.
- List your recurring withdrawals and deposits: You should go through your account and make a list of any recurring withdrawals and deposits. Even if a payment does not go in or out of your account every month, it is still important to include it on your list. For example, you don’t want your latest tax refund going into your closed account.
- Check your automatic transactions are moved to your new account: Many banks facilitate moving your automatic transactions including bills and salary payments to your new account. However, don’t assume that everything is in place before you close out your old account. Go through your list and make sure that the deposits and withdrawals have been updated to your new account.
- Settle your old account balance: Go through your latest bank statement and check if there are any pending transactions that may come out of your old account. You should also contact your bank to see if there are any charges or fees that will need to be applied to the account. You’ll need to leave sufficient funds in the account to cover these pending transactions.
- Close Your Account: You are now at the stage where you can close your account. Contact your bank to initiate the closure. This can be done online, in the branch, by mail, or via the customer support line, depending on your specific bank’s policies. You should also then wait to confirm the account closure.
Bank/Institution | Customer Service Number |
|---|---|
Chase | 1-800-935-9935 |
Capital One | 1-877-383-4802
|
Bank of America | 1-800-432-1000 |
PNC Bank | 1-888-762-2265
|
Wells Fargo | 1-800-869-3557 |
Citibank | 1-800-374-9700
|
Discover | 1-800-347-2683 |
US Bank | 1-800-872-2657 |
TD Bank | 1-888-751-9000 |
PenFED | 1-800-247-5626 |
Alliant Credit Union | 1-800-328-1935 |
Citizens Bank | 1-800-922-9999 |
Ally Bank | 1-877-247-2559 |
Properly Managing Your Bank Account Can Help Credit
Although your bank account may not feature on your credit history, there are some ways that properly managing your account can help your credit. This includes:
- Setting Up AutoPay: Your history of making on time payments makes up a significant aspect of your credit score. If you tend to struggle to remember when you need to pay each bill, set up autopay through your bank account. For example, you could set up a payment for the minimum amount due on your credit cards. This will ensure that you make at least the minimum payment and you can make additional payments during the month.
- Have Overdraft Protection: Whether you’re having a hectic month or you’re on vacation, it is easy to miscalculate how much money is remaining in your account. Unfortunately, slipping overdrawn can result in fees and charges that could impact your financial health and your credit. If your bank account has overdraft protection, take advantage of this feature and link your savings account to auto-transfer funds if you slip overdrawn.
- Use the Budgeting Tools: Many banks offer budgeting tools and planners to help you keep your finances in check. These are great resources that can help you to manage your money and work on improving your credit.
FAQs
Banks would like to keep your custom, so may want to discuss why you want to close your account. But, if you’re closing your account due to poor customer service, you may be left feeling that they don’t care either way.
While your debit card is linked to your bank account, your credit card should be independent of your account.
So, in theory, closing your bank account should have no impact on your credit card account.
If you are not using the account and you are incurring maintenance fees, closing the account is likely the best option.
If you’re mid way through your mortgage application, closing your bank account may be viewed in a negative light. Additionally, you may lose any relationship discounts offered if your mortgage is with your existing bank.
Once any outstanding transactions have been settled, any remaining funds can be sent to a designated account. If you close the account in a branch, you can even take the money out in cash from the teller.
If you take the proper steps, closing your bank account should have no negative impact on your credit.
