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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37842
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Does overdraft protection on a checking account go

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Does overdraft protection on a checking account go on credit reports? After all, it is a loan.
Hello again. Thanks for your continued confidence. You asked:

Does overdraft protection on a checking account go on credit reports? After all, it is a loan.

A: There are actually two different types of overdraft protection: (1) the default is that the bank will generally pay any overdraft up to an amount stated in the customer account agreement, and then charge the account owner a hefty fee for the privilege. This is not really a loan, at least it's not considered as a loan in the banking community. And, since there is no separate loan account associated with the overdraft, it is not reported as a negative on a credit report, unless the account holder doesn't pay the overdraft back.

The second type of overdraft is a separate loan account set up to pay any overdraft that occurs. This protection is in fact a loan agreement, and the account is regularly reported to the credit reporting agencies (CRAs), as in good standing or bad, just like any other loan agreement. The advantage of this agreement is that there is no overdraft charge triggered by the negative account balance -- instead, the borrower is charged interest on the loan. So, it's a short-term personal loan -- sometimes connected to a credit card issued by the bank -- rather than just a personal loan agreement.

BotXXXXX XXXXXne, a standard overdraft isn't reported as a negative to the CRAs, unless the account holder doesn't pay the fee and the overdraft. The loan agreement overdraft is simply a personal loan, and it's always reported to the CRAs, every month, just like any other loan agreement would be reported.

Hope this helps.
Customer: replied 3 years ago.

Does any type of overdraft protection identify the checking account?

A checking account number might appear on a credit report, due to an ordinary overdraft -- not on the regular credit reports that consumers usually think of when referring to credit reports (Experian, Equifax, and Transunion). But, there is a special credit reporting agency used by banks for the sole purpose of identifying troublesome bank account holders. And, I believe that a standard overdraft might show up that credit report if the account holder fails to pay.

A loan agreement overdraft would appear on a standard credit report, but it would not show the checking account number, nor refer to anything about a checking account, because the loan agreement account is the account that would be in default, and not the checking account.

Hope this helps.

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