How To Open a Checking Account With Bad Credit

Banks Editorial Team · September 18, 2019

Is it possible to open a checking account with bad credit? When you’re going through financial hardship, it’s easy to make poor decisions that will affect your credit. One loan default or missed payment could stay on your credit report for up to five years. If you have too many outstanding debts in your credit history, you may be ineligible to open a checking account at most banks or other financial institutions.

While it can be difficult to find one, some banks may disregard your past mistakes and give you another opportunity to rebuild your credit and open checking account with bad credit. If you have a history of bad credit but still need a checking account, you still have options.

 

 

Banks That Don’t Check Financial History

If you’ve tried to open your own checking account with bad credit in the past and your application was denied, it’s probably because the bank determined that you have a poor financial history. In addition to performing a credit check, banks will also look for red flags such as overdrafts and unpaid banking fees.

While uncommon, you may be able to find a bank that won’t check your financial history, but these usually come with some strings attached. You may be required to make regular direct deposits or have a certain amount of money in your balance at all times. That would be on option to get a checking account with bad credit.

Banks That Don’t Require Credit Checks

Before allowing you to have a checking account, many banks will run credit checks. This is because they don’t want to have customers who are known for making poor financial decisions. During a credit check, a bank associate will contact a credit bureau and obtain your full credit report. This report will have a history of transactions on all of your past and current bank and credit card accounts.

If you have had repeated problems in the past repaying a credit card bill or a loan, banks will typically deny your checking account application. There are certain banks that won’t check your credit, but you may be subject to additional fees on your account. Although it may be difficult you can still apply to open a checking account with bad credit.

Second Chance Banking

Some banks will allow you to open a checking account with bad credit even after seeing poor results in your credit check. Some banks understand that in order for a customer to improve their banking history, they need to be able to open a checking account. Second chance bank accounts work just like regular checking accounts but have certain limitations.

Second chance bank accounts often have restrictions on writing checks or online banking. You also may be subject to multiple monthly fees. While these can be annoying, a second chance bank account will help show financial institutions that you’re a reliable customer. If you can maintain a positive balance over a period of a few months, most banks will give you the option to upgrade your second chance account to a standard checking account.

Ask for a Review

Even if your application was denied, you can still try asking the bank to reconsider their decision. Some circumstances that caused your credit score to decline may have been out of your control, such as losing a job. If possible, speak with a bank associate in person and explain your situation. You should also make it clear that you have learned from your mistakes and are dedicated to improving your financial history.

How is Bad Credit Determined?

Usually, banks only want to give accounts to creditworthy customers to avoid losing money on overdraft fees. The most common way for them to check your banking history is by using ChexSystems. This is a consumer reporting agency that looks up the credit history associated with your social security number. This data will include your complete checking and savings account history, as well as any bounced checks, fraud, or other factors that make you a risky applicant.

Financial institutions may also evaluate your credit history by taking a look at your credit score. This is a number assigned to you based on your payment history in the past on credit cards and loans. A credit score of 579 or lower is considered poor by most financial institutions.

 

 

How Can You Fix Your Financial History?

Many people don’t know that they can order their own ChexSystems report. By doing this, you can see firsthand what needs to be fixed in your credit history. In some cases, these reports may contain errors that could keep you from opening a checking account. If this happens, you can file a dispute and have them removed.

If everything is correct, see if you are able to pay back any loans or debts that you neglected in the past. If you can work out an agreement with your lenders, they will be able to take your mistake off of your ChexSystems report.

It’s completely possible for you to open a new checking account with bad credit. Being denied because of poor credit can be frustrating and embarrassing, but you can find a bank that will be able to work with you to help improve your future credit rating.

 

 

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