Where can you open a checking account when you have bad credit?
Poor Credit and Checking Accounts
by Dollar Stretcher Contributors
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5 Big Credit Score Mistakes
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Does anyone know how to get a checking account if your credit is not very good? I have not been able to open a checking account due to credit problems in the past.
Show Good Faith Steps
Go to your local bank of preference first. Set up an appointment to speak with a new account manager. Explain to him or her that you have awful credit. Then tell them you are prepared to purchase a one-year CD at their bank. The amount may vary. We put down $1,000 for this when we did it three or four years ago. Explain to the new account manager that this CD is in exchange for a checking account opened in your name(s) at the bank. At the end of one year, we had to go in to another meeting with the same account manager. He pulled our bank records and saw that we had not bounced a single check. He let us cash out our CD and we got to keep our checking account. It worked for us.
Information from Experience
I would like to offer some advice to the person who was not able to open a checking account due to credit problems. I have had some experience with this. Here is what I have learned:
- Usually, checking accounts are refused based on what is called ChexSystems, not your credit report (although banks vary). The last information that I have heard is that about 80% of banks use ChexSystems. When you owe a bank money, like when you have insufficient funds and you have a negative balance and it is not paid back, they can send a report into ChexSystems. Since ChexSystems is not regulated as much as credit-reporting agencies, the banks are not required to report you or to turn down an account applicant because of a bad report. However, once you have anything on your ChexSystems report, most banks will turn you down for a checking account anyway.
- If you have been refused for a checking account based on a ChexSystems report, you are entitled to view your report for free. Go to ChexSystems.com and request a copy of your report. The site also has information on refuting entries on your report, etc. If there are entries that are in error, you can write to the bank that made the report and request that it be changed. You can also make additions to your report. For example, if you had extenuating circumstances, you can write a letter to that effect and request that it be placed on your report. But banks are not required to be swayed by it, so you may still be refused for an account. The web site above has information on submitting to your file as well.
- To the best of my knowledge, entries are cleared from your ChexSystems report after three years, but you should double-check that with ChexSystems. After that time, the entries are deleted and your report is considered clean. This is how I was able to obtain an account by simply waiting.
- Another option is get a savings account at a bank. If you can prove to be a long standing and good customer, they may be willing to compromise on a checking account. One credit union at which I had a savings account would not even issue an ATM card for the savings account because I was in ChexSystems. It is completely up to the bank.
Based on my personal experience, the best thing to do is get your ChexSystems report, then challenge anything you can and contact banks that have reported you. Compromises can be made. Banks that have reported you can rescind their negative reports or add information about how you have paid your debt, etc. But the most effective method is time. I dealt with cash and money orders until October of this year, when I was able to get a checking account and debit card from US Bank. And I think it taught me to manage my money better and now I know that I can be responsible with my checking account and not have problems like I did when I was younger.
Are you heading for debt trouble? This simple checklist can help you.
Checking Account Classes
We recently had problems with our checking accounts due to poor credit as well. In our area, we have local credit unions. We were able to obtain a checking account by taking some special classes. Once we graduated from these classes, we were ablt to open an account with them. The classes were not free. For us, it cost $35 per person or $60 for a couple. The classes are the basis of how to maintain a checking account, etc. So you might want to see if there are any types of these classes at any bank/credit union in your area.
Get a Fresh Start
There are many banks and credit unions who offer checking and savings accounts for a person with bad credit. There are monthly fees for this, such as $16.95 per month, which are eliminated at the end of one year if you've handled the account properly with no problems.
I've been looking in Las Vegas for my son with bad credit. Some of the banks or credit unions offer checking and/or savings accounts.
One of the credit unions (West Star) required only a one-time donation to the Friends of Nevada Wilderness, which can be done right at the credit union, to be accepted as a member. Credit unions require membership, usually $5, which remains on file. Sometimes one just has to live in the county, and sometimes it's one's type of work, etc.
I always prefer credit unions myself, as they are member-owned and member-supported, and usually provide many more benefits to members than banks offer.
Of course, banks offer the same type of accounts for people with bad credit with names such as Fresh Start or New Start. Just Google for this in your area, and you'll come up with a list. The institutions all want your business, but they need guarantees that you'll handle the account well. Therefore, they have fees for "taking a chance" on you. It might seem like a large fee, but there's really no choice if you must establish yourself.
Open a Savings Account First
If you can't get a checking account, try opening a savings account first. I don't know of any bank that will not let you open a savings account. Have your payroll checks deposited into this account, taking out just enough to pay your bills and live on each week. At the end of a six-month period, go and ask for a checking account at the same bank. Keep the savings account open, so they will have a record showing you have become a responsible customer. You may have to wait for a year to prove yourself, but in the mean time, your savings account will grow, if only by a few dollars a week. Again, proving that you can live within your means. Plus, it helps with your credit rating, too.
Faylee in Kingsport, TN
Fix Past Problems
If this problem has to do with bounced checks or overdrawing an account at a bank or credit union, then you will not be able to obtain another bank account because they have a check system that has your credit history with the bank. You will have to make good on the overdrawn account before you can open another one. That's just how the banks work.
Until You Improve Your Credit
I'm from Canada, but we do have second chance checking accounts offered by small local banks and credit unions. In the USA, you can try Wells Fargo, PNC, or Green Dot bank. You might have to make a deposit and monthly fee that's higher than regular accounts, but it's a solution until you improve your credit.
What the Experts Say
In response to this person's request to find a checking account with a bank with bad credit, I did some research on Bankrate.com and found this answer and possible solution to their problem.
You have one report for your banking history that is quite different from your credit report. If you have a "clean" banking history, you'll have an easier time opening a bank account.
You can request a free copy of your banking consumer report once a year by visiting ConsumerDebit.com. Negative information on your banking history report remains for five years, less than for bankruptcy. You have the right to dispute incorrect information on your consumer report.
Not every financial institution uses a banking consumer report to decide whether they want you as a customer. If you don't have a clean report, you'll probably need to find a financial institution that doesn't rely on the report issued by ChexSystems. A credit union can be a good alternative. Some banks offer a "second chance" account for people with troubled banking histories.
Some financial institutions will check a credit report when you apply for a checking account. They want to know if you're a good candidate for borrowing and credit cards. You can ask the institution if it plans to check your credit history.
A less invasive request for information, known as a "soft pull," shouldn't negatively affect your credit score. The other option is called a "hard pull," which is documented as a credit inquiry. Such credit inquiries remain on your credit report for two years but should only influence your credit score during the first year.
Take the Next Step
- Discover smart strategies for improving your credit score by visiting the Dollar Stretcher Library.
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