Can closing a bank account lower your credit score in Canada?

Closing a bank account sounds like a routine task. Maybe you’re switching banks to save on fees, moving to a different city, or simply trying to simplify your finances. However, many Canadians pause before doing it and wonder: could closing a bank account hurt my credit score?

The good news is that in most cases, it doesn’t.

Still, there are a few situations where closing an account could indirectly affect your credit. And because your credit score plays a big role in things like mortgages, car loans, and credit cards, it’s worth understanding how everything connects.

In this guide, we’ll walk through when closing a bank account matters for your credit score in Canada, when it doesn’t, and how to close an account safely. We’ll also look at practical examples and steps you can follow to avoid surprises.

How credit scores work in Canada

Before diving into bank accounts, it helps to understand how credit scores work in Canada.

In Canada, your credit score is calculated by two main credit bureaus:

• Equifax Canada

• TransUnion Canada

These organizations collect information from lenders and financial institutions. They track how you handle borrowed money and then calculate your score.

Most Canadian credit scores fall between 300 and 900.

Credit score ranges in Canada

What actually affects your credit score

Your credit score isn’t random. It’s based on several key factors.

One important thing to notice here: regular bank accounts aren’t listed.

That means your everyday chequing or savings account usually has nothing to do with your credit score.

Does closing a bank account affect your credit score?

For most people, the answer is no.

Closing a standard bank account—like a chequing or savings account—does not directly affect your credit score.

That’s because these accounts:

• don’t involve borrowing money

• aren’t reported to credit bureaus

• don’t appear on your credit report

So if you close an account that has no debt attached to it, your credit score should stay exactly the same.

However, there are a few exceptions where things can get complicated.

Situations where closing a bank account could affect your credit

Even though bank accounts themselves aren’t part of your credit report, certain issues tied to those accounts can show up on your credit file.

Let’s look at the most common situations.

Unpaid overdraft balances

Many Canadian chequing accounts come with overdraft protection.

This feature allows you to spend more money than you actually have in your account for a short period.

While this can be helpful in emergencies, it also means you’re technically borrowing money.

If you close your account while the balance is negative, the bank will still expect repayment.

If the debt goes unpaid long enough, the bank may send it to a collection agency.

Once that happens, the debt may appear on your credit report.

What happens if overdraft debt goes to collections

Collections can stay on your credit report for up to six years in Canada, so it’s something you definitely want to avoid.

Accounts linked to credit products

Sometimes a bank account is connected to other financial products, such as:

• credit cards

• lines of credit

• overdraft credit limits

If you close the account, the bank might also close or change the related credit product.

That can affect your credit utilization, which is a key factor in your credit score.

Why credit utilization matters

Credit utilization measures how much of your available credit you’re using.

For example:

If closing a bank account reduces your available credit, your utilization rate might increase. And higher utilization can lower your credit score.

Forgotten account fees

Another situation people sometimes overlook is unpaid bank fees.

For example:

• monthly account fees

• overdraft charges

• transaction fees

If the account is closed without settling these amounts, the balance may still be owed.

If the bank cannot collect the payment, it could eventually send the amount to collections—again creating a negative mark on your credit report.

Losing long-standing financial relationships

This situation is less direct but still worth mentioning.

Many Canadians have long-standing relationships with their banks. For example, your bank may also provide:

• your oldest credit card

• a line of credit

• a personal loan

If closing a bank account leads to closing these credit products, you could shorten your average credit history.

And since credit age makes up around 15% of your credit score, that can sometimes have a small impact.

Case study: when closing an account went wrong

Let’s look at a realistic example.

David’s experience in Ontario

David had been using the same bank for more than a decade. When he decided to switch banks to reduce fees, he closed his chequing account quickly.

However, two things slipped through the cracks:

• a $120 overdraft balance remained

• he didn’t notice a small service fee added afterward

Months later, the bank sent the unpaid balance to collections.

How his credit score changed

Even though David eventually paid the debt, the collection stayed on his credit report for years.

This situation shows how a small oversight can create a bigger financial headache.

How to safely close a bank account in Canada

The good news is that closing a bank account can be very simple—if you follow a few steps.

Step 1: make sure the balance is zero

Check your balance before closing the account.

You want it to be either:

• $0

• or positive

If there’s an overdraft, pay it first.

Step 2: check for pending transactions

Take a moment to review any transactions that haven’t fully processed yet.

These might include:

• debit card purchases

• bill payments

• online transfers

Wait until everything clears.

Step 3: move automatic payments

Before closing the account, update any automatic payments such as:

• utilities

• subscriptions

• insurance payments

• streaming services

Otherwise, missed payments could indirectly harm your credit.

Step 4: transfer your remaining funds

If there is money in the account, transfer it to your new bank account first.

This makes the closing process smoother.

Step 5: request confirmation of closure

Finally, ask the bank for written confirmation that the account has been closed.

It may seem like a small step, but it can be helpful if questions arise later.

When closing a bank account actually makes sense

Sometimes closing an account is simply a smart financial decision.

Many Canadians switch banks for reasons like:

As long as you close the account properly, your credit score should remain unaffected.

Bank accounts vs credit accounts: the key difference

One of the biggest sources of confusion is the difference between banking accounts and credit accounts.

Here’s a quick comparison.

Once you understand this difference, the whole topic becomes much clearer.

Smart tips to protect your credit score

If you’re planning to switch banks or reorganize your finances, a few simple habits can help protect your credit.

Keep older credit accounts open

Older accounts help strengthen your credit history.

Closing your oldest credit card, for example, can sometimes reduce your score.

Keep credit utilization below 30%

A good rule of thumb is to use less than 30% of your available credit.

For example:

Lower utilization shows lenders that you manage credit responsibly.

Check your credit report regularly

Canadians can request their credit reports for free from:

• Equifax Canada

• TransUnion Canada

Reviewing your report helps you spot:

• reporting errors

• identity theft

• incorrect collection entries

Catching problems early can save you a lot of trouble.

Should you worry about closing a bank account?

For most Canadians, closing a bank account will not affect their credit score at all.

Chequing and savings accounts are not part of your credit report, so simply closing one usually has no impact.

Problems only appear when accounts are closed with:

• unpaid overdrafts

• unresolved fees

• linked credit products

• outstanding balances

The key is to close accounts carefully and keep your finances organized.

In the end, your credit score depends much more on habits like paying bills on time, managing debt wisely, and maintaining healthy credit limits.

If you stay consistent with those habits, closing or switching bank accounts shouldn’t cause any problems.

Quick tip: before closing any bank account, take five minutes to review the balance and any pending fees. That small step can protect your credit score for years to come.