Does Overdraft Affect Credit Score?

Sometimes—but not automatically.

Use of overdraft itself usually doesn’t show up on your credit report if you bring your account back to positive quickly.

But if you don’t repay it, your account is closed, or it goes to collections, that can definitely hurt your credit score.

KOHO Essential to Avoid Overdraft Fees

A simple way to avoid overdraft issues is to use a prepaid setup, where you’re only spending money you’ve already loaded.

With KOHO Essential:

• It has a low monthly plan fee that can be waived when you set up direct deposit or add +$1,000.

• Use a prepaid Mastercard® for groceries, bills, subscriptions, and travel.

• Grow your savings with a 2% interest savings rate on your entire balance.

• Earn 1% cash back on groceries, eating & drinking, and transportation.

• You can subscribe to Credit Building for $10/month, it's an affordable way to build your credit history.

• Enjoy unlimited transactions and free e-transfers (never worry about fees when sending money to someone again).

When Overdraft Usually Doesn’t Affect Your Credit

In many cases, overdraft won’t hit your credit score if:

• You dip into overdraft briefly and bring your account back above zero quickly

• You stay within your approved overdraft limit

• You don’t miss any related payments or let the account sit negative for a long time

In those situations, your bank may charge fees and interest, but it doesn’t always report that temporary overdraft usage as a separate credit account.

When Overdraft Can Hurt Your Credit

Overdrafts can affect your credit score when things go wrong, for example:

• You don’t repay the overdraft and your account stays negative

• The bank closes your account due to repeated unpaid overdrafts

• Your negative balance is sent to collections

Collections and closed, unpaid accounts do show up on your credit report and can drag your score down for years.

Also, if your overdraft is actually structured as an overdraft line of credit, it may appear as a credit account on your report.

High balances or missed payments on it can impact your score like any other credit line.

How to Stay Safe Around Overdraft

• Treat overdraft (if you have it) as an emergency backup, not extra spending money

• Keep a small buffer in your main account so small slips don’t push you negative

Used carefully, overdraft is mostly a cash flow tool. Used heavily or left unpaid, it can turn into a credit problem, so it’s best to keep it rare and controlled.