Does a negative bank account balance affect your credit score? Here’s the truth

Maintaining a healthy credit score is crucial for getting seamless approvals for personal loans, credit cards along with other financial products. A common question many people raise in such a scenario is: Will a negative balance in a bank account affect your credit score?

It is important to keep in mind that your bank account balance is never tracked by credit bureaus, the financial habits it reflects can still have a bearing on your creditworthiness.

Vikkas Goyal, Founder of Rupee112, says, “A temporary negative balance won’t show up on your credit report, but consistent mismanagement could indirectly impact your credit score. It’s important to monitor your account regularly. Timely repayment, along with disciplined expense tracking, is key to maintaining financial health.”

Therefore, it is crucial to note that a negative bank balance happens when you withdraw more money than what is available in your savings or current account. This happens because of overdrafts, failed auto debits or delays in deposits.

Now this may attract financial penalties and charges, it still does not directly impact your credit score. As credit bureaus do not track regular account balances. Credit bureaus basically check and follow up with repayment patterns and behaviours. 

Still, such a situation of negative balances can influence your credit score indirectly. For example, if your personal loan EMIs or credit card bill payments get rejected due to insufficient funds lenders then may report missed payments. Persistent negative balances could also result in account closure, serious penalties or collections both of which could get highlighted in your credit report.

How different situations may influence your credit health

Note: These scenarios are indicative in nature. Actual impact may vary depending on your bank's reporting and credit bureau policies.

While a negative balance doesn’t directly lower your credit score, the consequences of unpaid dues, missed payments, or account closures can. It's wise to maintain sufficient funds and monitor your accounts to protect your credit profile.

Therefore, a negative balance generally has no impact on your credit score directly. Still, the consequences of unpaid credit card bills, missed personal loan EMIs or account closures can definitely impact your credit score negatively and even make future borrowing more cumbersome.

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