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TheSunKing

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Do negative balances and overdraft charges affect my credit score?
Do negative balances and overdraft charges from my checking account have an effect on my credit rating?

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The short answer is no, overdrafts on your checking account do not have any affect your credit score. Your credit scores are calculated according to a certain formula that takes into account information pertaining to outstanding debt, timeliness of payments, and related items. However, the determination of your credit score does not reflect any elements of your overdraft history with banks.

While overdrafts may not damage your credit score, they may cause your checking account to be canceled or applications to open new checking accounts to be rejected. Frequent overdrafts could cause your name to be reported to something called Chex Systems, a financial reporting system that banks refer to when considering a new checking account application. You can get reported to Chex Systems if eFunds, the company that invented and maintains Chex Systems, believes that you have abused your bank account or bank-related instruments in the past. This could potentially include overdrafts, especially if your bank covered your overdraft but you never paid them back for the amount they covered on your behalf.

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Top Contributor
19 Contributions
72 People Helped

Helpful to 4 out of 6 people

The short answer is no, overdrafts on your checking account do not have any affect your credit score. Your credit scores are calculated according to a certain formula that takes into account information pertaining to outstanding debt, timeliness of payments, and related items. However, the determination of your credit score does not reflect any elements of your overdraft history with banks.

While overdrafts may not damage your credit score, they may cause your checking account to be canceled or applications to open new checking accounts to be rejected. Frequent overdrafts could cause your name to be reported to something called Chex Systems, a financial reporting system that banks refer to when considering a new checking account application. You can get reported to Chex Systems if eFunds, the company that invented and maintains Chex Systems, believes that you have abused your bank account or bank-related instruments in the past. This could potentially include overdrafts, especially if your bank covered your overdraft but you never paid them back for the amount they covered on your behalf.

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over drawn checking CAN affect credit

If you are overdrawn but pay it back quickly, it will not affect your credit. However, if you leave your account in overdrawn status for a whiule, your financial institution could close your account, put your account in collections or charge off, and that will stay on your credit report for seven years. They can also report your account to chexsystems which makes it harder to open a checking account elsewhere. 

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