Ben Todd | Jun 2, 2017 | 1
Denied a Checking Account? Here’s What to Do
There are numerous reasons why you may be denied a checking account, so we explain why you may have been denied a checking account and we explain what you can do to rectify the situation. In most cases, the reason you have been denied a checking account is because of something you have done, which means that repairing the problem may take time.
Common Reasons Why People Are Denied A Checking Account
In most circumstances, people are refused a checking account because they have a tarnished banking history. Checks may have been deposited that then bounced, or the user may have issued checks that bounced, or the user may frequently overdraw. Typically, people are refused a checking account because the bank took a look at their credit history and credit score and then said no.
In most cases, the problem is not about your credit rating at all, it is about the your credit history and banking history. The bank, credit company or finance company takes a good hard look at your history and decides whether you are eligible for an account based on what they find out.
The Reasons Given By The Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau states that there are three common reasons why people are denied a checking account. The most common reason is that the applicant has already suffered an involuntary closure with another bank or credit union–which is usually a red-flag warning sign to other banks and credit unions. The second reason is that the applicant or his/her account has been tarred with the suspicion of fraud. The third reason is that the applicant has a shared or a joint account with somebody who has had an account closed involuntarily or where there has been suspicion of fraud.
Find Out Which Credit Company Generated Your Refusal
A bank or credit union is supposed to tell you which credit scoring company they used in order to reach their application decision/conclusion. The rule is not set in stone, but they are supposed to be able to provide you with information about which credit scoring company they used when they were handling your case. A bank or credit scoring company is not legally bound to tell you why they refused or which credit company they used, but many of them will tell you in order to prove they are not discriminating against you.
Once you have found out which credit company was used by the bank, you should be able to get a free report from the credit company. Again, this is a common rule–but it is not set in stone. If you are refused a checking account by a bank or credit union, you should be entitled to a free credit report from the credit reporting company so that you may see why you were denied. The rule is not enforced by law, but some credit scoring companies will give you a free report if you explain that your bank used their credit scoring services to deny you a checking account.
Find Any Errors And Challenge Them
You may have been denied a checking account because there is an error on your credit report or credit history that looks bad. In most cases, there are no errors, but the applicant is so eager for a checking account that he or she goes looking for errors. Ultimately, the applicant is disappointed when the elements that he/she challenges are proven to be correct; therefore they remain on his/her credit history.
Some errors exist because other people have used and abused your accounts. Other times, errors exist because of poor communication with the credit company. For example, you may have had a loan and paid it off, but the loan company hasn’t advised the credit scoring account. Another less common reason is that your current address is not listed in the report as your current address, which creates confusion and may contribute towards you being denied a checking account.
Get A Free Credit Report And Figure Out What The Problem Is
As mentioned earlier, it may be possible to get a free credit report if you are denied a checking account. However, even if you are not able to get one for free, it is worth trying to get your hands on one so that you may identify why you were denied a checking account. These days, you can get a free credit report with Quizzle, or Credit Sesame, or Credit Karma.
If everything looks okay on your credit report, then the bank or credit union may have had its own reason for refusing you. Yet, these days, the banks are so afraid of being accused of discrimination that they are usually willing to cough up one reason or another for why they said no.
Identify The Reasons Why You Were Refused On Your Credit Report
There is a chance that the bank or credit union looked at your credit history, banking history and/or credit score, and that is why you were denied a checking account. Once you have your credit report, you need to look for reasons why you may have been refused.
For example, there may be red marks on your credit history, or your credit history may show that you have maxed out your credit card and had it maxed out for years. Even with a free credit report, you can see how many years your credit card has been maxed out, and you can see all the payments you have missed or paid late. Your bank or credit union can also see those things, and what they see may lead them to conclude that you are not a viable or eligible as a checking account customer.
Pay Off Any Charges That Are Still In The Red
One of the first things you should do is to pay off any charges or balances that are in the red. I am not saying that you should pay off your debt before you apply for a checking account; I am only referring to the accounts that are in the red.
For example, you may have overdrawn by $30 on your business account and you have been paying a $12 charge + %interest every day. You should pay off that money and the charges so that your account is no longer overdrawn.
For example, you may have missed a credit card payment. You should pay your credit card payment so that your credit rating doesn’t sink any more than it has to.
Again, you do not have to pay off all your debt, only unplanned/unarranged debts. For example, if you have an arranged overdraft of $400 and your balance is -$390, then you do not have to repay the $390. However, if you have a $400 overdraft and your account shows that you are -$425, then you need to repay $25 so that you are back within the limits of your arranged overdraft.
Work On Your Credit For Six Months And Try Again
The reason we give this advice so often in our echeck.org articles is because a lot can change in your favor within just six months. The biggest factor is that if you have applied for credit once or twice and have been refused, then your refusal is more likely to be overlooked in six months than it is during the period of time running up to six months.
Another factor is the fact that you will have been living at your current address for another six months, which is always a good thing when people look at your credit. Credit companies, banks, financial companies and credit unions prefer it if you have been living at the same address for more than three years. But, the fact you have been living there for the last six months is a good start.
A big factor is the fact that in six months you will have been working at your job for another six months. For example, if you are denied a checking account and you have been working at your current job for two months, then it doesn’t look too good. However, after a six-month period, you will have been working at your current job for eight months, and that makes you more creditworthy.
It may not seem like much, but a good six months where there are no red/negative marks on your credit report may be enough to show the bank or credit union that you have changed your ways and that maybe they should consider you for a checking account.
Use A Pre-Paid Debit Card Until You Are Eligible For A Checking Account
Living without a checking account, (also known as a current account or debit account) is tough, and if you are taking our advice and working on your credit rating for six months–then you are still going to need some sort of account. Instead of opting for a second-chance account, you may opt for a pre-paid account. It is an online account that comes with a card of its own (usually a MasterCard). Load money into it and spend the money online or by using your card in stores and at ATMs.
Try A Paid Checking Account That Some Call A Second-Chance Account
A second-chance account is a checking account that you usually have to pay for. You have to pay for it because the account is only aimed at people with terrible credit ratings. They make you pay a maintenance fee for having your account because they know nobody else will have you.
Some people call these a second-chance account, and the point of having one is to prove that you can manage your bank account without any negative incidents. Some people opt for a second-chance account over a pre-paid account because maybe their employer won’t agree to pay them by direct deposit into a pre-paid account. Another reason is because it is harder to find a pre-paid company that will cash checks, so people have to opt for second-chance bank accounts instead.
Do Not Pay A Company To Vouch For You
There are some companies and some people who claim they can get you a checking account bank account by vouching for you. They claim that they can get you a bank account if you let them vouch for you and handle your application. They are all scams and cannot be trusted.
Do Not Pay A Credit Repair Company
It may seem tempting, but the last thing you need to do is start paying out money–you need to be saving and keeping your money. A credit repair company will do nothing for you that will help you get a checking account any sooner. Most will give you a big overblown plan on what to do that is no different (in substance) to our advice about working on your credit for six months. The credit-repair company will want oodles of money for doing very little. Take the advice listed on this article, and you can save yourself a bundle of money by not paying a credit repair company.
Do Not Pay A Life Coach Or Financial Coach For Advice
Some articles are going to tell you to seek help as a way of repairing your banking or financial history and future. Do not pay a life coach or a finance coach. Work on your credit for six months and then re-apply for a checking account. If you have been denied a checking account, a life coach or finance coach will not help you. All they will do is take your money and waste your time.
Conclusion – It Is Not That Difficult
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Working on your credit for six months is simple. All you have to do is avoid doing negative things and continue doing positive things. For example, do not overdraw, do not miss payments, do not lose your job, do not apply for more credit, and do not move house. Keep up any debt payments, try to pay off a little debt, and try to earn a little more. After six months of good behavior, you are often able to return to your bank or credit union and re-apply for a checking account. Being denied a checking account is not the emotional or financial sledgehammer that people think it is. Give it six months of good behavior and you will find that more banks and credit unions start saying yes.