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Making this mistake when closing your bank account could affect your credit score

Before you close a checking or savings account, be sure to double-check that you've paid off any outstanding balances — doing so could save your credit.

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There are many reasons why you may choose to close a bank account: too high of fees, you don't like the customer service or perhaps you're moving and looking for a new bank with a physical branch near you.

The good news is that, unlike closing a credit card account, closing a bank account generally won't hurt your credit score.

Because your credit score is calculated based on information found in your credit report and bank accounts don't show up on this report, the actual closure of your checking or savings account won't directly affect your credit.

Where you could be in trouble, however, is if your account has been left with an outstanding balance, such as an overdraft fee that you never paid.

If the bank decides to send this debt you owe to them to a collection agency, it could go reported to the credit bureaus. A collection account on your credit report can cause a serious drop in your credit score, especially if recent.

According to Experian, one of the three main bureaus, "Collections fall under payment history, which is the biggest factor in your FICO Score calculation, driving 35% of your score." Collection accounts, paid off or not, remain on your credit report for seven years, though their impact on your score lessens over time.

What to do before closing a bank account

Before closing any bank account in your name, contact the bank first to ask if you have any negative balances, debts or fees on the account.

If you've recently bought something or wrote a check to someone, wait for that transaction to be completed before closing the account so to ensure your balance stays positive. You'll also want to make sure you opt out of any automated payments (subscriptions or streaming services) that withdraw money monthly from your account.

For those transferring from one bank to another, Experian suggests leaving some cash in your old bank account for a few weeks in case there are any pending transactions you are forgetting.

Why keeping an eye on your credit is important

While you take care to check for any negative balances before closing a bank account, consider ways to keep an eye on your credit at all times.

Credit monitoring services can keep you alert when there are changes made to your credit report, such as a collection account being added.

To stay up to date at no cost, consider signing up for CreditWise® from Capital One or Experian free credit monitoring — both of which made CNBC Select's ranking of the best credit monitoring services.

CreditWise® from Capital One

Information about CreditWise has been collected independently by Select and has not been reviewed or provided by Capital One prior to publication.
  • Cost

    Free

  • Credit bureaus monitored

    TransUnion and Experian

  • Credit scoring model used

    VantageScore

  • Dark web scan

    Yes

  • Identity insurance

    No

Terms apply.

Experian Dark Web Scan + Credit Monitoring

On Experian's secure site
  • Cost

    Free

  • Credit bureaus monitored

    Experian

  • Credit scoring model used

    FICO®

  • Dark web scan

    Yes, one-time only

  • Identity insurance

    No

Terms apply.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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