Bounced Checks or Non Sufficient Funds (NSF) Checks can be Sent to a Collection Agency and Damage Your Credit Score
NSF checks (Non Sufficient Funds), also referred as a bounced check are considered bad and will end up on your credit report — lowering your FICO Score and preventing you from obtaining credit.
There are other dangers such as your bank may revoke your checking privileges and close your account. A collection placed against you can convince other banks to refuse to extend a checking account to you.
Bank accounts don’t show up on your credit report unless you go into collections, but financial institutions have other ways of figuring out if you are a risky customer. They primarily use a system called ChexSystems. It is a lot like a credit report except that it focuses on check writing. It is even regulated under the Fair Credit Reporting Act, like any other credit reporting agency.
The receiver of a NSF or bad check can transfer or sell the check to commercial collection agency, which will pay the receiver an up front sum of a certain percentage of the face value of the check. Later, the commercial collection agency employed tries, usually with a 100% success rate, to recover the check amount from the issuer by employing difference collection techniques.
The collection activity will affect your credit score for seven years.
Tags: Bank Account, Bounced Check, Checking Account, ChexSystems, Collection Activity, Collection Agency, Credit Report, Credit Score, Fair Credit Reporting Act, Non Sufficient Funds, NSF, Seven Years