does closing a checking account hurt your credit

You’ve decided it’s time for a fresh start with your finances, and part of that plan involves closing an old checking account you no longer use. But a little voice in the back of your mind asks a crucial question: does closing a checking account hurt your credit? It’s a common concern, as we’re often told that our financial decisions can have a lasting impact on our credit scores.

The good news is, you can breathe a sigh of relief. The act of closing a checking account does not get reported to the three major credit bureaus and therefore does not directly affect your credit score. Your credit report is primarily concerned with your history of borrowing money and repaying debts, like credit cards and loans. Since a standard checking account is not a line of credit, opening or closing one isn’t a factor in your credit history.

Where the Real Impact of Closing an Account Lies

While your credit score is safe, closing a checking account can affect your finances in other important ways. The most immediate risk is with your bank itself. If you close an account with a negative balance or any outstanding fees, the bank may eventually send that debt to a collection agency. A collection account is a major negative mark that will be reported to credit bureaus and can severely damage your credit score. Always ensure your balance is zero and all checks and automatic payments have cleared before you initiate the closure.

What to Do Before You Close Your Checking Account

A little preparation can save you from future headaches. Before you close the account, make a list of all your automated transactions. This includes direct deposits from your employer and automatic bill payments for things like utilities or streaming services. You’ll need to redirect these to your new account first. Leave the old account open with a small amount of money for a month or two to catch any stray payments you might have forgotten.

The Bottom Line on Your Banking Decisions

In the grand scheme of your financial health, closing a checking account is generally a neutral event for your credit report. The key is to manage the process carefully. By ensuring all obligations are met and switching over your automatic finances ahead of time, you can close your account confidently and move on without any negative surprises.