Will Closing a Bank Account Affect Your Credit?

Chances are good that you have heard closing credit cards is a bad financial move. But, what about your bank account? If you decide you want to change to a different bank, should you keep your account open to avoid hurting your credit score?

Here's what you need to know.

Closing a bank account isn't the same thing as closing a credit card

Closing a credit card is bad news for your credit score for a few reasons. You'd end up reducing the credit available to you by shutting down the line of credit. Since credit utilization ratio is an important factor when your score is calculated, reducing credit available hurts your score because you'll appear to be using a higher percentage of your remaining credit.

The positive account history could also be lost over time (assuming you paid your card on time) and your average age of credit could become shorter once a credit account has been closed. These factors could have an adverse impact on your score as well.

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But, when you close a bank account, you don't end up reducing your credit lines or changing the types of credit accounts you have, or shortening your credit history. Your bank accounts typically are not reported to the credit bureaus so there should be no impact if you shut your account down.

There is one possible exception to this, though. If you close a bank account that has a negative balance and you don't make things right with the bank, it's likely you'll have your account sent to collections and that could then show on your credit record as a delinquency. You don't want this to happen, so if you are closing an account that has a negative balance because you overdrafted it or because you bounced a check, be sure to bring your balance up to $0 ASAP.

Should you close your unused bank accounts?

Since closing down an old bank account won't hurt your credit score, should you do it or should you just leave the account open?

In many cases, it's best to shut down the account if you aren't going to use it any more. This is especially true if the account charges monthly maintenance fees because you don't want to pay a fee for an account you aren't using any more.

Even if the account doesn't charge fees, just leaving it sitting open without using it could make you vulnerable to someone stealing your account access without you noticing or to unexpected withdrawals from the account that could send it into a negative balance.

You don't want to be caught off guard to find out your account access has been compromised and you have a negative balance or some old membership has an annual fee that's withdrawn from the account and pushed your balance below $0.

So, if you are sure you don't plan to use a particular bank any more, you should seriously consider shutting the account down. Check back over past statements, change any auto withdrawals or bill pays from the account, and let the bank know you will not need it any longer. That way, you won't have to worry about it -- and your credit won't be hurt by the closure.