How does bouncing a check affect my credit score?

By Amy Fontinelle AAA
A:

A bounced check does not directly affect your credit score, but it could have an indirect effect on it.

Banks do not report bounced checks to the major credit bureaus - Experian, Equifax and Transunion - so a bounced check won’t show up on your credit report and won’t impact your credit score.

Banks have the option, however, to report bounced checks to ChexSystems, a consumer-reporting agency for banking activity. This company helps banks identify consumers who present a risk because of their history of mishandling their accounts, and bouncing checks falls under that definition of risk. If your bank reports you to ChexSystems, the negative mark will remain on your account for five years. This could cause you opening a new bank account during this time.

To find out if your ChexSystems report contains any negative information, order your free ChexSystems Consumer Report online or by phone, fax or mail. Just like with a credit report, you can dispute any information you think is incorrect, and you may be allowed to submit a statement for your file presenting your side of the dispute.

Too many checks bounces could also cause problems when you want to pay by check with a merchant who uses a verification system called TeleCheck. If this system has linked the check you’ve presented for payment with a history of unpaid checks or bank account debt, it will decline your check and the merchant will ask you for an alternate form of payment.

If you bounce a check and don’t repay it, your bank could sue you or send your account to collections. The collection agency may report your unpaid debt to the traditional credit bureaus, and thus affecting your credit score. However, if you quickly repay your bank for the bounced check, it will have no reason to send your account to collections and the bounced check will not affect your credit score.

Another way a bounced check could indirectly affect your credit score is if you were using that check to pay a company that reports your repayment history to the credit agencies, such as your mortgage servicer or student loan servicer. In this case, it wouldn’t be a bounced check that would show up on your credit report, but a late payment. Again, if you correct the problem quickly (within 30 days of the payment due date), your creditor won’t report your account as past due and your bounced check won’t affect your credit score. 

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