Does Overdraft Affect Credit Score?

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What Is An Overdraft?

An overdraft occurs when you spend more money than you have in your account. If you have an overdraft, you will have to pay fees. An overdraft differs from a loan in that you must repay the money plus interest with a loan.

What Is A Credit Score?

Credit score is a numerical representation of your creditworthiness. This choice is based on your credit history, which is a record of your borrowing and repayment patterns. Your score enhances the likelihood that you will be accepted for loans and credit cards.

Does Overdraft Affect Credit Score?

Yes, overdrafts will affect your credit score. An overdraft occurs when you spend more money than you have in your account. This can happen if you write a check for more money than you have, or if you use your debit card to make a purchase when there is not enough money in your account.

How Does Overdraft Affect Credit Score?

Overdraft your checking account can have more consequences than just costly fees. It can also affect your credit score. Since your checking account is not typically shown on your credit report, overdrafts in your checking account are not recorded. However, it doesn’t mean that over-drafting can’t harm you.

The Difference Between An Authorized And Unauthorized Overdraft

The main difference between the two is that with an authorized overdraft, you will usually be charged a fee, while with an unauthorized overdraft, you will be charged a higher fee and may also be subject to additional penalties.

How To Avoid An Overdraft?

One way to avoid an overdraft fee is to make sure you have enough money in your bank account to cover any transactions that may occur. If you don’t have enough money in your account, try to get a loan from a friend or family member. Another way to avoid an overdraft fee is to only spend what you have on hand.

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