Writing checks used to be the standard way. But as people move to online payments, writing checks has become less and less frequent. Therefore, a lot of information is unknown to many about how exactly checks affect your credit.
For example, one of the questions is whether bounce checks can negatively affect your credit.
Though bouncing checks can cause severe problems with your account, their ability to affect your credit is minimal. That is, as long as you immediately, it will never even touch your credit report.
But if you’re afraid that this may happen, you may still have a ton of other questions.
In this quick guide we’re going to talk to you about the effects of bouncing a check on your credit and other important information to help you ensure that you’re staying financially responsible when it comes to your banking account.
Do Banks Forgive Bounced Checks?
Bouncing a check can be quite embarrassing and come with some serious ramifications when it comes to your overall financial solvency.
However, if it is your first time bouncing a check with your bank, they may be a little bit more forgiving than if it is your 5th or 6th time.
In this case, you may find that your bands or overdraft fees.
However, once it becomes a pattern, they may become more strict on the rules and end up charging you both of those fees, which could affect your account greatly.
On the whole, most banks will charge a non sufficient fee which tends to be about $25 to $30.
On top of that, if the bank decides that they’re going to pay the check for you, they will also tack on an overdraft fee. The fee itself is dependent on the bank and the type of account you have.
Do Banks Report Bounced Checks?
The good news is that if you were worried about bounced checks affecting your credit, banks themselves do not report any of this to the major credit bureaus.
That means if you do happen to get a check back marked insufficient funds, it won’t show up on any of the major credit reports.
Therefore a bounced check will have no direct effect on your credit score. It still may affect your overall credit with the bank and will potentially affect your financial solvency, but it will not impact that score.
In Which Case Can It Affect Your Credit Score?
When we say that a bounced check will not affect your credit score directly, it does not mean that there is no way that it will affect your credit. Instead, it can inadvertently play havoc with your credit scores if it is the balance check to someone who reports to credit agencies.
This is, in fact, the only case where a bounced check will affect your credit score. Otherwise, the only effect that’s going to have is on your account itself with the bank.
How Can it Indirectly Affect Your Credit Score?
As we said above, the only way a bounced check can indirectly affect your credit score is if it was a payment to someone who regularly reports to credit agencies to update your payment history.
Places like mortgages, loan payments, and credit card companies all do this, so bouncing a check to them will affect your credit score.
In truth, any form of payment to someone in one of the major industries, whether that be utility payment or, as we said, loan payments, will typically get reported to credit agencies. This is so the credit bureaus can maintain an up-to-date payment history.
Any late payment or nonpayment can end up costing you up to 180 points off your credit score. So it could potentially affect it pretty significantly.
How Can You Avoid it?
So even though bouncing a check does not affect your credit score directly, it still impacts your overall financial well-being. That means it would be best to avoid bouncing checks and to do that, we have put together a couple of tips to help you.
- Make sure you’re Always aware of your account balance.
- Try to leave extra money in there just in case unexpected expenses like an overdraft fee or emergency payments need to be made.
- Always make sure that you’re balancing out your account so that you can keep an accurate idea of how much you have in the account.
Final Thoughts on Do Bounced Checks Affect Your Credit
Bouncing a check can be, as we said, an embarrassing situation and lead to some extensive fees being tacked onto your account.
But unless a check is written to someone who reports to the major credit bureaus, it won’t directly affect your credit score. Even still, it’s best if you try to avoid bouncing checks. After all, no one wants to deal with all those fees and headaches.