Having a bank account is pretty much a necessity in life. But, if you’ve experienced a series of tough and unexpected events that resulted in poor credit, it may be difficult to open a new bank account at some institutions.
Never fear. You can still open a new bank account with bad credit. But, in order to do this, it’s important for you to understand what you may need to do first. From there, you’ll be ready to find the best types of banking options available to you. Want to learn more? Read on.
Understand What Banks Look at
Just like credit card companies, banks look at the credit history of their customers before granting them access to financial products and services, which include checking and savings accounts.
There are several ways banks review your credit history, including running a credit check through one of the three major credit bureaus: Experian, Equifax, or TransUnion. Generally, banks use a credit check to find out your credit score, which is a number used to identify how much of a risk you are to banks and other financial institutions. This score is based on factors like your repayment history for loans and credit cards, as well as whether you have historically made payments on time.
Banks also work with other agencies to dig deeper into your banking behavior. One of the agencies they may turn to for this is ChexSystems, which uses your social security number to look up your financial history. ChexSystems can see any of your bad checks, overdrafts, and account freezes that may have negatively affected your finances. The company then reports this information to banks. In addition, banks check for unpaid negative balances, excessive withdrawals, and check fraud. If any of these things are present, the bank may reject your application for an account.
If this happens, you have a few options. First, you can try to fix the issues. A second option is to ask the bank to reconsider your application. Lastly, you can try to find a bank that won’t check your past banking history. Scroll down to learn more about each of these three options.
Fix Past Banking Problems
If you’re rejected for a new bank account, it may be worthwhile to try to fix your past banking problems. This, in turn, will help you repair your financial history.
To start, you can order your ChexSystems report. This will be particularly helpful if your ideal bank uses this specific system to evaluate account applications. But, even if the bank in question doesn’t use ChexSystems, this report can help you repair your credit history as you’ll be able to see the issues that you need to correct.
For example, if you have negative balances – such as a loan that hasn’t been paid in full or a former bank account where you spent more money than you had – you can call the banks listed to find out if you can still pay them back. If they will allow you to do this, you can then ask if they will remove their negative reports.
If you can’t get your past mistakes corrected and removed from the report, keep track of the dates when they occurred. Most negative balances drop off reports after five years. So, if you are close to the five year mark, the issues may resolve themselves.
Something else to be aware of: just like a credit report, a banking history report can have errors. So, make sure you look over your report completely to ensure it is correct. If not, contact ChexSystems and start a dispute over the mistakes on your report.
Request a Reconsideration
If you’re denied the ability to open a new account because of poor credit, you may want to ask the bank to reconsider your application.
Believe it or not, if you can explain the circumstances that caused your financial issues, some banks may make an exception. It never hurts to ask and the bank might approve your account after a second look.
Find a Bank That Doesn’t Check Banking History
Finally, there are banks that don’t do credit checks or use outside agencies to check your financial history. To that end, many of these banks have rules that you’ll need to adhere to, such as maintaining a minimum balance in your account or making a certain number of direct deposits each month.
We get it: you may want a bank that won’t check your financial history. You also don’t want to deal with a whole bunch of rules. Luckily for you, there is a bank that may suit your needs perfectly.
Chime Bank doesn’t do credit checks or use ChexSystems as part of their decision-making process for new accounts. Better yet, Chime has no monthly minimums or fees and no overdraft fees. This makes Chime Bank a great choice if you have bad credit and need to open a new bank account.
A Final Word
Struggling with your finances and bad credit can be frustrating. This is why it’s important to work on improving your credit and seek out a bank that will help you reach your money goals. Are you ready to open a Chime bank account today?