Trying to muddle through life in today’s society without a checking account is almost impossible. If you have had some bad history with financial decisions and have a bad credit score, you may find it harder to get a checking or savings account. Your credit score lets a bank know if they can trust you with their means of credit, whether it be a credit card, a loan, or a mortgage, but a poor credit score does not immediately disqualify you from opening a checking account with them.
Aside from a credit check, banks will also use other third party companies to look at all of your banking history. Though your credit history and opening a bank account are not directly related, banks will still use that information to make the final decision on whether or not they will allow you to open an account. Having a bank deny your request to open an account can be pretty disappointing, so to prevent this from happening, there are a few things you can do.
Open a Regular Account
Nothing ever happens without first trying! Though you may have bad credit, most banks will not deny you their services as long as your overall banking history is not horrible. Your bad credit may keep you from getting to open an account that draws a lot of interest, such as a money market account, but the institution will still let you open a basic checking account.
If you have a lot of overdraft fees that are unpaid, have a history of bank fraud, or owe money to a bank, it is very unlikely you will be allowed to open a basic account.
Get Your ChexSystems Report
Getting to see exactly what the bank sees when they check your banking history is important. If you can find things on your record that are “fixable,” you will raise your likelihood of being able to open a new checking account. Most banks use the ChexSystem company, so requesting your record from them will be your best bet. You are allowed one free report a year, so you can get the report at no charge and start fixing your banking records.
If you find any records that seem to be an error, you need to dispute them and try to have them taken off your permanent record. If your record is accurate, you will have to wait 5 years before any of the activities can be taken off.
If your ChexSystem report is considered “bad” because you still ow money to a bank, you need to find a way to pay off what you owe. When you pay off your debt to the bank, they will contact ChexSystem and have that part of your record taken off. After the bank has taken that charge off, your record could be “fixed” and other banks will more than likely allow you to open an account with them.
Check Your Credit Report
After checking your ChexSystem report, go check your credit. Though some banks don’t do a credit check, others do simply because it is their policy to do so. If they find your credit to be bad, they may deny you an account. Looking at your credit report and score can help you understand what a bank is seeing.
When you get the report, look it over and make sure there are no errors. If you find one, just like with the ChexSystem report, try to dispute it and have your record “fixed.” Just making a small fix can drastically change your credit score and have you one step closer to getting a checking account even with a poor credit score.
If you can’t get your ChexSystems or credit score reports fixed, you should look for a bank that does not use either of these ways to determine your eligibility to open an account. Credit unions as well as smaller, local banks are less convenient, but typically will not do either one of these checks and are good places to keep your money secure.
Second Chance Bank Account
If you have fixed your records but still can’t open a normal checking account, opening a second chance bank account is an option. These types of accounts are offered specifically for people who have been denied a normal account because of credit or ChexSystem issues. They function like normal bank accounts, but have some stiff conditions and fees associated with them. If you keep this account in check for a few years, banks will typically let you switch over to a normal bank account.
Most second chance accounts will let you make direct deposits and offer some sort of credit card. Most accounts will not allow you to write checks from them. Many local banks and online banks offer these types of accounts. To find your best option for you, you should do some research online and see what different banks offer.
Online and Investment Banking
Many online banks do not use a credit or ChexSystems report to account for you eligibility. So opening an account at an online bank may be possible. You may find some drawbacks since the bank has no physical locations, but you will be able to open an account.
Opening an investment banking account at a firm, such as Merrill Lynch or Fidelity is another option. These types of accounts typically require a large deposit to open the account. These firms will not do a credit check, so your bad credit will not disqualify you.
Prepaid Debit Card
If you for some reason you still can’t open up an account, getting a prepaid debit card will have almost the same feel as using a traditional bank. There are many prepaid debit cards out there that will allow you to use online features to either make deposits onto the card or withdraw money from your account.
These cards typically have ATM access for instant cash withdrawals as well. They can also function as a credit card and you will be able to make online purchases with them. Prepaid debit cards may have a few transaction fees associated with them, so comparing each one before purchasing one will be to your benefit.
Though they are not a traditional way of putting your money away, prepaid debit cards are a good way to manage your money if you find yourself in a situation where you can’t open any sort of bank account.
Find Your Best Option
If you can’t open a normal checking account due to bad credit for a bad ChexSystem report, there are plenty of options out there. Fixing your credit score or your ChexSystem report should be your first step. Often times, simply by reviewing your reports and paying off debts, banks will then let you open accounts with them.
If not, opening a second chance account or finding an internet bank is your next best option. If you find yourself not being able to open any kind of account anywhere, getting a prepaid debit card is the way to solve your problem.