Will Closing Your Checking Account and Switching Banks Hurt Your Credit Score?

by RC on October 18, 2011

With new debit card fees being implemented or proposed by several large banks in the last few weeks, many people have decided they have “had enough”, and are looking for alternatives with less fees, such as credit unions or online checking accounts like ING DIRECT Electric Orange℠ checking or Ally Bank’s Ally Interest Checking Account, many of which have very low fees or no fees whatsoever.

Probably due to this recent activity, I’ve heard of several people asking whether or not closing their bank accounts will hurt their credit score.

The short and sweet answer is No.

Simply closing your checking account will have no effect on your credit score whatsoever- this information is generally not provided to the credit bureaus, which monitor revolving credit lines, such as credit cards or loans like a car or house loan.

Information on your checking account or savings accounts are handled by Chexsystems , which in a way operates how we think the credit bureaus do. For example, if you bounce a bunch of checks and don’t pay the bank back, this information will be reported by the financial institution (i.e., bank), and the Chexsystems report may prevent you from being able to open another account in the future- they keep the information on file for five years, according to their website.

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The longer version is still no, but, for example, you have both a checking account and a credit card with Bank of America or some other large bank, and want to close your credit card account with them as well, the fact that you are closing one of your credit lines in the form of a credit card will likely have a negative effect on your credit score, how much depends on your overall credit history and how long you’ve had that credit card, as well as other factors.

If you have a short history with not many credit items and you close your oldest card, it could hurt more than if you have a longer, broader history and the card you are closing is relatively new. You can read more in my article on why your credit is important and how to improve it.

To recap, as long as you close your checking or bank account properly you should be fine.  Make sure you don’t just pull all of the money out and end up overdrafting something you set on auto payment or some similar scenario- this could have a negative impact on your Chexsystems report, which could cause problems with opening a new bank account in the future. Closing a credit card you may have with a bank will have a varying effect on your credit score, but it will depend on many other factors as noted above, be sure to think if that really matters to you before you close a credit card.

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