Does an Overdraft Affect Your Credit Score?
You may have heard banks talk about overdraft fees and protection, but how does this affect your financial future in St. Louis? Does overdraft affect credit score or can you spend however you see fit? We’re here to help you find out just how overdrafts do and do not influence your credit, so you can make the best financial decisions for your circumstances. Learn more with Green Light Auto Credit.
What is Overdrafting?
When you spend more money than you have in checking, you send your account into negative figures. That is called overdrafting. So whether you spend $105 or $200, if you only have $100 in checking then you have overdrafted. Usually this results in a fee from your bank if you have overdraft protection. If you do not have this protection, your transaction will be declined.
Using Overdraft: Credit Score Reporting
So, does overdraft affect credit score? Yes and no. Overdrafts in checking are not reported on your credit report, because your checking account is not generally included in your credit report. But, that doesn’t mean overdrafting can’t harm you:
- Specialty Agencies: Certegy Check Services, ChexSystems, and Telecheck are banking reporting bureaus monitoring everything from overdrafts to bounced checks. If you try to open a new bank account, the bank may deny you based on that information. However, this doesn’t affect your credit score.
- Collections: If your overdraft fees are sent to collections, then the problem becomes more serious. Pay your fees and debts, and you’ll be in good shape. But if you let the debt slide, the collection agency will create an account for you which will show up on your credit report.
- Checks: If you try to pay off your credit card with a check and the check bounces, this can also put you in a vulnerable position. If you don’t pay the returned check fee promptly, you’ll be reported as delinquent – which can ding your credit score.
Simple good habits like checking your balances, confirming payments, and monitoring your credit report can go a long way toward a bright financial future.
Learn More with Green Light Auto Credit
You’ve seen how using overdraft can affect credit score results, but there’s plenty more to learn with Green Light Auto Credit. Contact us with your questions and we’ll be happy to help you with any financial issues around Herculaneum and Florissant.
