If you write a check and the amount of money in your account cannot cover the amount of the check, this is referred to as a bounced check.
A Bank's Response To A Bounced Check
Some banks return the check and refuse to pay it. Other banks will cover the amount of the check, causing your account to have a negative balance. In almost all cases, the bank will charge a fee for bouncing a check, which could drop your account balance even further.
Banks typically do not report a bounced check to the bureaus that have your credit report. If you do not cover the fees incurred by your bounced check, the bank might report the nonpayment of the debt you owe them after about 90 days have passed.
Information On Your Credit Report
Your credit report does not contain information about your bank accounts, so there is no data there about bounced checks from your bank. Your credit report specifically deals with information regarding debt. This includes mortgages, school loans, credit cards and other borrowed or owed money.
If the company that you wrote the check to does not get the money from your bank, they might consider the missed payment to be a debt owed. The company can then turn the bounced check and the unpaid bill over to a collection agency. The collection agency can report the unpaid bill to the credit bureaus and have it placed on your credit report.
If the check that bounced was intended as payment for a credit card bill, mortgage or other debt, the lender might report a late or missing payment to the credit bureaus. If you pay the debt immediately, you might be able to avoid having it reported.
Bounced Check Reporting System
While bounced checks do not directly affect your credit report, they are reported to a reporting agency called ChexSystem. ChexSystem records negative information about your banking transactions, such as bounced checks or money owed to a bank. They do not record positive banking data. Individuals with no bounced checks or problematic transactions have an empty ChexSystem report.
Banks use ChexSystem to investigate people who are trying to open a new bank account. The bank can request a ChexSystem report and may base their decision on the data from the report. ChexSystem keeps the information about your bounced checks on file for five years.
