Checking accounts are necessary in today’s world.
Unfortunately, if you have a history of risky financial behavior (which may include bad credit), you can find yourself barred from opening a checking or savings account.
Your credit history (which is tracked by the 3 major credit bureaus) affects your ability to get credit — credit cards, loans, mortgages, etc — but it does not directly affect your ability to open a bank account.
Financial institutions have their own version of a credit check that tracks your banking behavior rather than your credit history. This behavior is recorded by most of the major banks through the following agencies:
ChexSystems is the most ubiquitous financial history tracking agency with roughly 80 percent of the banking institutions using it to vet potential clients.
It’s never a good experience when the bank denies you an account simply because you have a few problems with your credit. Poor credit and obtaining a checking account are not related. Sadly banks still rely on your credit to decide if they will give you a checking account.
It is possible that your actual credit score can effect your ability to open a bank account, IF ChexSystems or Telecheck is not used by a bank. In this situation banks may opt to look at your credit history instead — but this is dependent on banking policy.
With a poor credit score, the few banks that do check this as a requisite for opening an account, will think you are not a good customer and assume you won’t be able to pay your bill or will over draft your account.
So it’s possible to have bad credit while still opening a bank account.
And it’s also possible to have good credit while also not being able to open a bank account because you have a ChexSystem record.
So, if you have BAD Credit and need to open a bank account, here are your options.
Step 1: Try Opening a regular bank account
This is the first thing you should try. If you can open a bank account right away, you are done and problem is solved.
Even if you have poor credit, the good news is that as long as you have not mismanaged previous bank accounts and established a poor banking record, you should be able to open a new (regular) checking account.
Note, you will likely be unable to open a bank account if you have the following:
- racked up overdraft fees and not paid the bank for these
- committed some sort of bank fraud in the past
- owe the bank money
Step 2: Check ChexSystems Report (and try to get records removed)
The idea here is to get your credit and chexystems reports, look at them, and see if you can fix anything on the reports.
Fixing can mean:
- finding an error and reporting that error to get it removed (credit report or chexsystems report)
- disputing something about that report (credit report or chexsystems report)
- finding the bank who may have added a record regarded owed payment, then paying the bank what’s owed to get record removed (ChexSystems report)
Fixing will mean an improved score (ChexSystems or Credit Score) and may improve your ability to OPEN new bank accounts.
Here’s what to do:
1) Request Your ChexSystems Report
IF you are unable to open a regular bank account, then it’s likely you have a ChexSystems record — regardless of your good credit or bad credit.
You need to request your FREE ChexSystems report and see what it says. You are allowed one free report each year.
Look at the report and make sure it’s correct. If you spot errors, DISPUTE them and you may be able to clear your chexsystems record enough to be able to open a new bank account.
If your ChexSystems record exists and you can’t dispute it, you are going to have to wait 5 years from the time the record is added for the record to be dropped.
2) Pay Off Any Owed Bank Fees and Request Bank to Remove Record
IN the event you have a ChexSystems record and it relates to owing a bank some money, contact the bank and PAY what you owe off. Banks can get records they’ve added to ChexSystems removed and may do so if you pay what you owe.
This may fix your record.
If successful, you may be able to open a new bank account.
So assuming you find you owe a bank money, pay that bank what you owe, then request the bank to remove the ChexSystems record, you can then try opening a new bank account once you verify that information has been removed from your ChexSystems Record.
3) Check Your Credit Report
While many banks do not actually do credit checks, some banks may depending on policy. So bad or poor credit can still hinder your ability to open a new bank account even though many banks do use ChexSystems and NOT your credit history as the main determinant as to your eligibility.
Request a credit check to see where you stand with your credit history. You might as well know what it is because banks may look at it too.
Once you obtain your credit report, review it for any errors. Even small errors can affect your score and an increase will improve your chances of opening a checking account online if the bank does a credit check on you prior to opening an account.
Again, your credit report is not essential here, but it’s still a good idea to know what it says — so we recommend you check it first.
Step 3: Find a Bank That Does Not Use ChexSystems
If you have a Chexsystems record and can’t fix that record, then you need to find a bank that does not use chexsystems.
Credit Unions are a good bet as are smaller, community banks. Some major banks don’t use ChexSystems, but may use Telecheck or EWS.
If EWS is used, your credit history may come into play.
Where to find such a bank? Well, check out our Guide to Opening a Non ChexSystems Bank Account Article and our List of Non ChexSystems Banks by State.
Step 4: Open a Second Chance Checking Account
IF the following has not worked so far…
- You can’t open a regular account
- You have done a ChexSystems check and you DO have a record
- You are unable to fix your ChexSystems record (i.e. you can’t pay a bank money you owe them and request them to remove it or you can’t dispute your record)
- You can’t find a bank that does not use ChexSystems (note, you SHOULD be able to if you look around enough)
THEN you need to look at opening a Second Chance Checking Account.
These are basically special bank accounts offered by many banks that are for people who are unable to open regular bank accounts because of credit or ChexSystems issues. They function just like regular bank accounts, but may have additional limitations imposed on them and additional fees. However, if you prove yourself over a year or two, the banks will upgrade you to a regular bank account.
Second Chance Account Features
Some second chance account offer Direct Deposit. It’s also possible to get a Visa Debit Card (or MasterCard Debit Card). Unfortunately, you won’t be able to write checks from a Second Chance account. Still, this kind is excellent if you want to improve your credit. After a year, apply for a normal bank account. You should be approved.
Where to Find a 2nd Chance Account
Many 2nd Chance Checking account are offered online. As a bonus, it’s very easy to apply for the account with many online bank lenders.
Your local bank may also offer this type of account but it will require you to complete some paperwork.
Whatever you do, you want to research online for the best available option in bank accounts for people with bad credit. This way you can make the best decision for your needs.
We’ve combined a list of SOME second chance checking accounts in our Guide to Non ChexSystems Banks. Check this list for some recommendations.
Step 5: Open an Online Bank Account
If you are not able to open a basic account try using an internet bank (i.e. online only bank account). You may need to open with a larger deposit but these banks often do not require any credit check (or if they do, they may accept poor credit) and they may not use ChexSystems.
Again, it depends on the actual bank, but it’s worth a short trying.
Some legitimate internet banks are ING Direct, HSBC Internet Account and Emigrant Direct Internet.
Read our Best Online Bank Accounts article for some recommendations
Step 6: Open An Investment Bank Account
If you are not successful opening the regular bank accounts, second chance accounts, internet accounts, and can’t find a bank that does not use chexsystems, then you have one more option: try to open an investment account (Merrill Lynch, Fidelity).
These investment accounts need large opening deposits but usually offer an additional checking account. Credit scored are not used to determine if you can get this type of account.
Step 7: Get a Prepaid Debit Card
If all else fails and you absolutely are unable to open any sort of bank account, anywhere, but you need access to BANKING, such as the ability to deposit money to an account online and to withdraw that money from ATM’s or to make purchase on a debit card, consider getting a prepaid debit card.
There are companies that offer prepaid debit card accounts that function just like a regular checking account (except, you can’t write checks). You can deposit money onto that account (topping the card up), you can withdraw money from that account (via ATMs or online), or you can use the debit card directly to purchase things.
Usually you will need to pay per transaction, but some companies may offer some type of monthly fee setup.
Some prepaid debit cards may also function like a prepaid credit card — you can also use them as prepaid credit cards to make purchases online with the credit card number — as well as allowing normal debit card features.
Prepaid Debit cards are not as good as a bank account, BUT if you can’t get a bank account, they WILL work in a pinch as a substitute.
The Final Word
We’ve found that the simplest method is opening a bad credit checking account with an internet bank or second chance account.
However, the best sort of account is a REGULAR bank account. We highly recommend you look for a bank that does not use ChexSystems and try opening a bank account there. This will give you a regular bank account without any limitations or any extra costs that may be associated with second chance, internet, or investment accounts.
The good news is that if you have bad credit, you can still easily open a regular bank account.
What’s much worse than bad credit is having a ChexSystems record — this record is what can really keep you from opening any sort of bank account.
Once you DO manage to open a bank account, make sure you PAY all fees, don’t rack up any overdrafts, and don’t write checks you can’t cash or commit any sort of banking fraud. If you have a ChexSystems record, it takes about 5 years for the records to be tossed — so as long as you practice GOOD banking, your ChexSystems record will improve over time.
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If you have bad credit, you should also make an attempt to improve your credit. Credit History, while not as important for opening a bank account, is vital if you want to get any sort of loan or access to some credit in the future. Good credit also means you will pay much less interest. So make sure you improve your credit if you credit is bad!