Apr 10, 2020
How to Open a Bank Account With Bad Credit
Some banks don’t do credit checks, others might give you a second chance.
- You can still apply to open a Stash online banking account2 if you have bad credit.
- Stash does not perform traditional credit checks prior to or after account openings, but it does go through standard customer identification and verification procedures first.
- Stash offers a network of ATMs. Stash subscribers get a bank account that comes with flexible money management, early payday4, and a debit card that can earn you rewards3.
Does your credit score have more dings than a beat-up Chevy? A bad credit score may cause your landlord to raise an eyebrow and keep you from getting that car loan. But some banks may also give you a hard time when you go to open up an account.
Don’t despair, you can still open a bank account even if you’ve got bad credit, typically defined as a credit score below 670.
Why do banks care about my credit score?
Banks, like most financial institutions, take on risk when you become a customer. They want to be sure that you will pay your bills and won’t bounce checks. In short, they want to make sure that they won’t be chasing you down for unpaid fees, or that you won’t be constantly overdrawing your account.
Not all banks will check your credit score. But if they do, having a bad score can also add to the list of things that can cause you to be rejected.
How do banks check my credit?
Banks are checking up on more than just your credit. When you apply for a credit card, the company will check your credit report by looking it up at credit bureaus including Equifax, Experian, and TransUnion. Your bank will check your banking behavior with agencies like ChexSystems, Early Warning System, Telecheck, or Certegy. These agencies track your deposit history with banks and credit unions.
What are banks looking for?
When you apply for a checking account your bank will enter your name and Social Security number to conduct a routine financial background check using ChexSystems, or one of the consumer reporting agencies mentioned above, to scope out any negative banking history.
Here are some things that can affect your chances of opening a checking account.
- Overdrawn accounts: When you make a withdrawal and your account dips below zero.
- Bounced checks: When you write a check for money you don’t have.
- Suspected check fraud or identity theft: If you’re flagged for illegal activity
- Security alerts: If your account is constantly being compromised.
- Account freezes: When the bank stops all transactions related to your account.
- Excessive withdrawals: If you’re taking or transferring money from your savings or money market account too many times in a month. (This doesn’t include withdrawals using a bank teller or from ATM withdrawals.)
Good to know: You can request a free copy of your credit report from each of the three credit bureaus once every 12 months, Under the Fair and Accurate Credit Transactions Act (FACTA). You can also get a free copy of your ChexSystems report annually here.
Oh no, I was rejected. What do I do now?
There are a few options. You can get in touch with the bank that you’d like to do business with and nicely request for them to reconsider. Just be prepared to face up to your past mistakes when they go through your history.
You can also look into second-chance banking. Second-chance checking accounts are bare bones versions of standard checking accounts, typically with fewer features and lower spending limits. Not all banks offer this service, but the ones that do can offer you a clean slate and the chance to rebuild your financial history.
Banks that offer second-chance accounts minimize their risk by offering you less favorable benefits compared to those with traditional bank accounts. For example, a second-chance banking customer may have a minimum balance, higher service fees, and access to fewer ATMs. Each second-chance bank is different, so be sure to ask a lot of questions when and if you choose this option.
Are there any other options?
You can still apply to open a Stash online banking account2 if you have bad credit. Stash does not perform traditional credit checks prior to or after account openings, but it does go through standard customer identification and verification procedures first.
Stash offers a network of ATMs. Stash subscribers get a bank account that comes with flexible money management, early payday4, and a debit card that can earn you rewards3.
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