There are numerous reasons you might want to close a bank account. Poor customer service, higher interest rates from a competitor, or the desire to pay lower bank fees are just a few examples of why you might want to break up with your current bank or credit union.

On a positive note, closing a bank account shouldn’t have a direct impact on your credit report or credit score. But if you fail to close a bank account the right way, there is a chance your actions might result in future credit score damage.

Read on to learn some simple tips that can help you protect your credit when you close a bank account.

Do bank accounts appear on credit reports?

In general, your credit reports from the three major credit bureaus — Equifax, TransUnion, and Experian — do not contain information about your bank accounts. Whether a deposit account (e.g., checking account, savings account, etc.) is open or closed, it typically won’t appear on your credit report, at least not in a traditional sense.

Credit scoring models, such as FICO and VantageScore, only consider information that appears on your credit report when calculating your credit score. So, if a closed bank account doesn’t appear on your credit report, it won’t hurt your score. For that matter, a closed bank account absent from your credit report won’t help your credit score either. It wouldn’t have any impact whatsoever.

How negative bank account balances could affect your credit score

As mentioned, banks don’t typically report your deposit accounts — open or closed — to the credit bureaus. But if you close a bank account that has a negative balance and you fail to pay off the debt you owe, there’s a chance the financial institution might turn to a collection agency for help recovering the unpaid balance.

A collection agency may opt to report your unpaid debt to one or more of the major credit bureaus. At that point, a collection account could appear on your credit reports with Equifax, TransUnion, and/or Experian. And if a collection account shows up on any of your credit reports, it could damage your credit scores.

To make matters worse, collection accounts could remain on your credit report for up to seven years. Even if you pay or settle a collection account after the fact, the credit bureaus may still keep the item on your credit report for up to seven years (unless the account contains incorrect information or is fraudulent).

Medical collections are an exception to this rule. If you pay or settle a medical collection, you can dispute the account and ask the credit bureaus to remove it from your credit report. The credit bureaus must remove medical collections that have balances under $500 from credit reports as of 2023.

Negative bank account balances and ChexSystems

It’s also important to understand that closing a bank account the wrong way might cause you other potential issues. When you close a bank account with a negative balance, the financial institution might report your outstanding debt to ChexSystems, a banking reporting agency that provides verification information to financial institutions.

Negative information on a ChexSystems banking report won’t impact your credit score. But you might not be eligible to open a new checking or savings account with another bank in the future if you have derogatory items on this type of consumer report. Until you pay off the old debt, you might have to consider alternative banking solutions, like second-chance checking accounts, prepaid debit cards, or other options.

How to close a bank account without hurting your credit score

If you want to close a bank account, you should make an effort to safeguard your credit reports and credit scores from unpleasant surprises in the future. Here are some tips that could help:

• Open a new bank account: Before you close a bank account, especially the primary checking account you use to pay your bills, it’s important to open a replacement first. Otherwise, you might find yourself in a difficult position when you need to conduct regular financial transactions.

• Update automatic drafts: It’s also wise to go through past bank statements before you close a checking account. You’ll want to look for any automatic drafts that come out of your account on a regular basis. If you use your current checking account to take care of any financial obligations on autopay, consider setting up a new payment method for those accounts. At the very least, you should schedule payment reminders to manually take care of those bills from your new bank account.

• Monitor your credit reports: Closing a bank account shouldn’t have a direct impact on your credit reports or credit scores. But it’s always wise to keep a close eye on your credit reports to be sure they remain accurate and free from damaging information. You can access free copies of your three credit reports online each week via AnnualCreditReport.com. If you discover credit errors when you review your reports, you have the right to dispute inaccuracies with the appropriate credit reporting agencies.

Bottom line

The bank accounts you use to manage your money shouldn’t have a direct impact on your credit score. But if you’re not happy with your current banking relationship, it might be a good time to search for a better fit.

In some cases, you might opt to keep your old bank account open even after you open a new one. But if you decide to close your former checking or savings account (perhaps to avoid paying a monthly maintenance fee on an account you no longer plan to use), the tips above could help you protect your credit in the process.