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What Happens To My Credit Score If A Check Bounces?

When consumers bounce checks, they can feel a great deal of stress. They scramble to get to the bank or make a phone call to find out how this happened, if it’s their fault and what they need to do to fix it. Thanks to mobile banking, this is becoming less of a problem because people have access to their accounts all the time and are less likely to overdraw or write a check for an amount they know they don’t have. Further, checks no longer take three to four days to clear, but merely a matter of hours. Additionally, banks will usually cover the costs of the check and automatically overdraw a consumer’s account, placing a fee that is due relatively quickly.

But this doesn’t mean that checks aren’t still bouncing, nor that consumers shouldn’t worry about it happening. Whether it is a mistake or there is not enough money in a consumer’s account to back the check, dealing with a bounced check can be a hassle. Fortunately, unless a consumer is in financial trouble anyway, hassle is going to be the worst of it. While it is not efficient to bounce a check and this is not viewed kindly by the bank, bouncing a check usually does not directly affect a consumer’s credit score. But that doesn’t mean it never will.

Bounced checks can affect credit, but not directly

According to Credit.com, bounced checks don’t typically show up on credit reports for a couple reasons. First of all, banks don’t share information about checking accounts with the credit reporting bureaus, as checking accounts and credit are two separate things. This might not be the case if there is an investigation into a consumer’s financial activity, such as bills being turned over to a collection agency. If this is the case, then the bank will turn that information over.

However, bouncing checks on a regular basis may frustrate a bank, which in turn could prohibit a consumer from opening a credit card with that specific bank. While there won’t be credit reporting agencies involved, the bank might simply turn down a consumer for a credit card based on poor checking history. But again, this is not information that will be on the consumer’s credit report, simply a hassle to deal with.

Additionally, if a consumer repeatedly bounces checks and the bank cannot collect the money, then this will become a different story. According to Credit.com, bounced checks aren’t likely to show up on a traditional credit report unless the balance is turned over to a collections agency.

However, there is an organization that serves as a precautionary measure for banks that cannot retrieve funds that are owed to them by a consumer. The organization is known as ChexSystems, and was established in 1971 to protect banks from consumers who can’t repay bounced checks, among other things. Essentially, the organization can file a claim against a consumer based on a poor checking history, and that claim can last up to five years and prevent a consumer from opening a new checking account. While this isn’t the same as a red flag on a consumer’s credit report, the concept is the same and prevents consumers from banking without restrictions.

A direct blow to the credit score

There are two ways that a bounced check can harm a consumer’s credit score, and one is if the check was written to pay off a credit card or other form of installment loan, such as a student loan or mortgage. If a check bounces, and the consumer fails to make a payment on the credit, then this will impact the credit score, according to DoughRoller money blog. Another way is a bounced check can directly affect a consumer’s credit score is the late payment that stem from bouncing a check. When a check is bounced, though the bank will typically cover the amount, the consumer still owes that amount to the bank, not to mention the late payments affiliated with that cost. banks don’t want to be covering customers’ bouncing checks, so late fees re in place to prevent it from happening,. An accrual of late fees, especially if they aren’t kept up with, can be detrimental to a consumer’s credit score.

When writing checks or sending them digitally, consumers should be aware of how much money they have in their account and keep in mind that modern technology has pushed up the clearing time. No longer can consumers write a check knowing they have a few days to get the money in the bank. To avoid all problems with a checking account, and indirectly a credit status, consumers should never write a check for more than they have in their checking account.

For more information on preventing dips in your credit score and making payments by the due date, visit Cash Central’s Resource Center.

The views expressed by the articles and sites linked in this post do not necessarily reflect the opinions and policies of Cash Central or Community Choice Financial®. 

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