A bounced check may or may not directly affect your credit score, but it certainly can damage your financial standing in several other ways.
Banks do not report bounced checks to the major credit bureaus, so a bounced check won’t show up on your credit report from Experian, Equifax or Transunion, and won’t hurt your credit score.
A Bad Mark
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 a history of mishandling their accounts. Bouncing a check 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 prevent you from opening a new bank account during this time.
You can find out if your ChexSystems report contains any negative information about you by ordering a free ChexSystems Consumer Report. Under federal consumer protection law, you can obtain one free report every 12 months.
As 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.
Another Bad Mark
Writing too many bounced checks may prevent you from paying merchants by check in the future.
Merchants use a verification system called TeleCheck to help them determine if your check is good. If this system has linked the check you’ve presented for payment with a history of unpaid checks, your check will be declined and the merchant will ask you for an alternate form of payment.
The Legal Risk
If you bounce a check and don’t deposit money to cover it, your bank could sue you or send your account to a collection agency.
The collection agency may report your unpaid debt to the credit bureaus, damaging your credit score.
If you immediately deposit enough money to cover the bounced check, the bank will not send your account to collections and the bounced check will not affect your credit score.
The Risk to Your Credit Score
A bounced check can affect your credit score is if the check was used to pay a debt to a company that routinely reports your repayment history to the credit agencies. That includes mortgage and student loan payments.
In this case, it would show up on your credit report as a late payment, not a bounced check. If you correct the problem 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.
Purposely Writing a Bad Check
People don’t usually get jailed for writing a bad check. If they did most of us would be behind bars. But if it looks like you wrote a check knowing that it was no good, and you fail to cover your bad check and the bank overdraft fee, you could be in real trouble.
The laws vary by state, but generally writing a bad check can be a misdemeanor or a felony, depending on the size of the check. In either case, it can lead to jail time or a fine or both.