Closing a Bank Account: Impact on Your Credit Score
When considering closing a bank account, one common concern is how it might affect your credit score. Unlike closing a credit card account, closing a bank account generally does not hurt your credit score. However, it is important to understand the specific circumstances that could impact your score.
About Closing a Bank Account
It is widely reported that closing a bank account will not harm your credit score. This is because bank details are not included in your credit report. In fact, the only way a bank account could impact your credit score is if your bank decides to send the debt owed to a collection agency, which could then be reported to the credit bureaus. Credit scores are calculated based solely on the information included in your credit report, and bank details are not part of this report.
What Happens When You Close a Depository Account?
If you are the one closing a deposit account, such as a savings or checking account, there is typically no negative impact on your credit score. For example, if you recently closed a savings account to move your balance to a higher-yielding account, this action generally does not affect your credit score. However, it is important to note that closing a credit account, such as a credit card, can have significant consequences if the bank closes the account instead of you. In such cases, it can indicate that the bank no longer considers you creditworthy, which could be a red flag for future credit applications.
Impact of Closing a Credit Account
If a bank closes a credit account, such as a credit card, even when the account hasn't been in default, it can mark you as a risk to future creditors. Banks often share information about customers who have defaulted on loans, and your name could be included in this blacklist, impacting your ability to obtain future credit. On the other hand, if you are the one who closes a credit account, as long as you have met all your payments when due up to that point, there will be no harm to your credit score. I had a similar experience where I closed a credit card I had not used in years, knowing that it would not benefit either me or the bank in the long run.
Conclusion
To summarize, closing a bank account generally has no direct impact on your credit score. However, if a credit account is closed by the bank, it could harm your credit score by indicating potential creditworthiness issues. Always consider the specific context and the party closing the account to understand the full implications of such actions.
Remember, maintaining a healthy credit score is crucial for financial stability. If you are ever unsure about the impact of closing an account, it is advisable to consult with a financial advisor or review your credit report thoroughly.