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. 

RELATED FAQS
  1. What affects your credit score

    Learn how your checking account relates to your credit score, as well as what types of banking activities do and do not get ... Read Answer >>
Related Articles
  1. Personal Finance

    Credit Repair: How to Improve Your Credit Score

    There is no quick fix for a bad credit score, but there are several strategies you can take to improve your credit rating and save money over the long term.
  2. Personal Finance

    The 5 biggest factors that affect your credit

    Are you in the process of getting a loans? Learn how credit companies use these factors credit companies rely on to determine whether to lend to you and at what rate.
  3. Personal Finance

    Taking Your Personal Financial Inventory

    Taking a step back and assessing your personal finances each year can show how well you're doing with saving and what's needed to manage credit and debt.
  4. Personal Finance

    What's Keeping You From an Excellent Credit Score

    Learn what affects your credit score most and what might be lowering your score without you knowing it.
  5. Personal Finance

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  6. Personal Finance

    6 Benefits of Increasing Your Credit Limit

    If you can resist the urge to overspend, then raising your credit limit could benefit you in various ways.
  7. Personal Finance

    Should Your Credit Rating Scare You?

    Take the mystery out of credit scores by learning the most important ways it can impact your life.
  8. Personal Finance

    The Complete Guide to Checking Accounts

    Here is the A to Z of checking accounts: types of accounts, basics on check writing, debit cards, overdraft protection and much more.
  9. Retirement

    7 Ways to Use a Strong Credit Score During Retirement

    Find out why it is important to maintain a good credit in retirement. Learn seven reasons not to leave your credit score behind when you retire.
  10. Personal Finance

    Debunking Credit Myths and Improving Your Score

    The best way to improve your credit score is to ignore the many credit myths that exist and use these tips.
RELATED TERMS
  1. Bounced Check

    A bounced check is slang for a check that cannot be processed ...
  2. Credit Score

    A credit score is a number ranging from 300-850 that depicts ...
  3. Check Representment

    Check representment is a service offered by banks that resubmits ...
  4. Business Credit Score

    A business credit score is a number indicating whether a company ...
  5. Certified Check

    A certified check is a type of check for which the issuing bank ...
  6. Bad Check

    A bad check is a check drawn on a nonexistent account or on an ...
Trading Center