Overdrafts usually don't show up on your credit report at all

A single overdraft — even a large one — will not damage your credit score because banks do not report overdrafts to the three major credit bureaus (Equifax, Experian, and TransUnion). Your credit score is built from information in your credit report, and overdraft activity does not appear there. You can overdraw your account by $500 and your score will not move.

The damage comes later, if you don't fix it. If you leave an account overdrawn for weeks or months without paying it back, the bank may close the account and send it to a collection agency. That collection account will appear on your credit report and will hurt your score. The overdraft itself was free to ignore; the unpaid debt is not.

Banks also report severely overdrawn accounts to ChexSystems, a banking history database separate from your credit report. This does not affect your credit score, but it can make it harder to open a new checking account at other banks for several years.

Key Takeaways

  • An overdraft by itself does not appear on your credit report and will not lower your credit score, even if it is large.
  • If you leave an account overdrawn for 30 to 60 days without paying it back, the bank may send it to collections, which will damage your score.
  • Banks report chronic overdrafts to ChexSystems, a separate database that can block you from opening accounts elsewhere but does not affect your credit score.
  • Overdraft fees (typically $25 to $35 per transaction) are charged immediately, but the credit damage only happens if the debt goes unpaid long enough to reach collections.

When an overdraft becomes a credit problem

The transition from "overdraft" to "credit damage" happens when your bank gives up on you. Most banks will close an account that stays overdrawn for 30 to 60 days without payment. Once closed, the bank may sell the debt to a collection agency or pursue it themselves. At that point, the unpaid overdraft becomes a collection account on your credit report.

A collection account will lower your score by 50 to 150 points, depending on your current score and how much is owed. The damage is worst if you have few other accounts or a short credit history. The collection account will stay on your report for seven years from the date of first delinquency — meaning from the date you first failed to pay, not from the date the bank closed the account.

You can still settle a collection account after the bank has closed it. Paying the full amount owed will stop the collection agency from pursuing you further, though the account will remain on your credit report. Negotiating a settlement for less than the full amount is also possible, but the collection agency has no obligation to accept it.

Overdraft fees versus credit score impact

Overdraft fees are immediate and separate from credit damage. Each time you overdraw, your bank charges a fee — usually $25 to $35 per transaction, though some banks charge $15 and others charge $40. If you overdraw multiple times in one day, you may be charged multiple fees. These fees are deducted from your account, making the overdraft larger.

The fees themselves do not appear on your credit report. They are a cost you pay to the bank, not a debt you owe. However, if the overdraft grows large enough because of repeated fees and you don't pay it back, the unpaid balance will eventually reach collections.

Some banks offer overdraft protection, which links your checking account to a savings account or credit line. If you overdraw, the bank transfers money from the linked account instead of charging a fee. This stops the overdraft from happening in the first place, so there is no credit risk and no fee.

How long an overdraft can sit before it hurts your score

Most banks will close an overdrawn account after 30 to 60 days of non-payment. Some banks are faster — as little as 14 days — and some are slower, but 30 to 60 days is the standard window. Once the account is closed and sent to collections, the damage to your credit score begins immediately.

During those 30 to 60 days, you will receive notices from the bank. The first notice usually comes within a few days of the overdraft. Later notices will warn you that the account will be closed if you don't pay. These notices give you time to deposit money and bring the account current, but they are also a countdown to credit damage.

If you receive a notice that your account will be closed, depositing enough money to cover the overdraft and all fees will stop the closure. The account will remain open and no collection report will be filed. This is the only way to prevent the credit damage once the bank has decided to close the account.

Overdrafts from different banks and payment methods

Overdrafts can happen through debit card purchases, ATM withdrawals, checks, and automatic bill payments. The bank treats all of them the same way: if the money is not there, the transaction either bounces or goes through and creates an overdraft. Debit card overdrafts are the most common because they happen instantly and you may not realize the account is empty.

If you have accounts at multiple banks, an overdraft at one bank does not affect your other accounts. Each bank reports to ChexSystems separately, so an overdraft at Bank A will not prevent you from opening an account at Bank B — though Bank B may see the ChexSystems record and deny you anyway. A collection account, however, will appear on your credit report and affect your score regardless of which bank holds it.

Online banks and credit unions handle overdrafts differently than traditional banks. Some online banks do not allow overdrafts at all — the transaction simply declines. Credit unions often have lower overdraft fees and longer grace periods before closing an account. If you are prone to overdrafting, switching to a bank with no overdraft option or a credit union with more lenient policies can prevent the problem entirely.

What to do if your account is overdrawn

If you discover an overdraft, deposit money immediately to cover it plus all fees. Call the bank and ask whether they will reverse any fees as a courtesy — some banks will reverse one or two fees per year if you ask, especially if your account has been in good standing otherwise. Do not wait for a notice; the sooner you pay, the sooner the bank stops charging fees and the sooner the risk of closure disappears.

If you cannot deposit enough money right away, contact the bank and explain your situation. Some banks will work with you on a payment plan or will delay closing the account if you show good faith by making a partial payment. This is not may provide, but it is worth asking before the account reaches 60 days overdrawn.

If your account has already been closed and sent to collections, you can still contact the collection agency and negotiate. Request a pay-for-delete agreement, where the agency agrees to remove the collection account from your credit report if you pay the full amount owed. Many agencies will not agree to this, but some will, especially if the debt is recent and relatively small.

Rebuilding your credit after an overdraft reaches collections

A collection account will lower your score, but the damage decreases over time. The account has the most impact in the first year after it is reported. After two years, the impact is noticeably smaller. After seven years, the account falls off your credit report entirely and stops affecting your score.

You can speed up recovery by paying down other debts and making all payments on time going forward. If you have a credit card, using it for small purchases and paying the full balance each month will rebuild your score faster than waiting for the collection account to age. A secured credit card (one backed by a cash deposit) is an option if you cannot get approved for a regular card.

Do not ignore the collection account or assume it will go away. Collection agencies can pursue the debt for years, and some states allow them to sue and garnish your wages. Paying the debt or negotiating a settlement stops the pursuit and prevents legal action, even though the account will remain on your report.

Frequently Asked Questions

Can I get an overdraft removed from my credit report?

An overdraft itself will not appear on your credit report, so there is nothing to remove. If the overdraft was sent to collections, you can request a pay-for-delete agreement with the collection agency, though they are not required to agree. After seven years, any collection account will fall off automatically.

Will overdrafting hurt my chances of getting a loan or credit card?

A single overdraft will not affect loan or credit card decisions because it does not appear on your credit report. If the overdraft reaches collections, it will lower your score and make approval harder. A ChexSystems record of overdrafts may also cause lenders to view you as higher risk, even if your credit score is good.

What is the difference between an overdraft and a bounced check?

An overdraft means the transaction went through even though you did not have enough money — the bank covered it and charged you a fee. A bounced check means the check was rejected because there was not enough money. Bounced checks do not appear on your credit report either, but they may appear on ChexSystems and can damage your banking history.

If I pay off an overdraft, will my credit score go back up immediately?

If you pay before the account reaches collections, your score will not be affected at all because the overdraft never appeared on your credit report. If the overdraft was already sent to collections, paying it will stop the collection agency from pursuing you, but the collection account will remain on your report and continue to affect your score until seven years have passed.

Can a bank charge me overdraft fees if I did not authorize overdraft protection?

Yes. Overdraft protection is optional, but most banks charge overdraft fees by default. You can opt out of overdraft fees, which means transactions will be declined instead of going through and creating an overdraft. Contact your bank to change this setting, or switch to a bank that declines transactions by default.