For someone with a mixed financial history getting a bank account can be a nightmare. However, it’s nearly impossible to fix a bad financial situation without a bank account. The good news is, several options exist to help even those with bad credit get bank accounts. The first step is looking at something called the “ChexSystems report.” The second step: finding the black marks on the report that are causing the trouble and fixing them.
These things can take time. Consumers needing a quick boost can take a short online class called CheckWise to increase their chances of getting an account. Those who continue to be denied for traditional accounts still have options. Credit unions, debit accounts and second chance accounts are all good ways for those with bad credit to get the benefits of a checking account.
Bank Accounts and Bad Credit
You probably found this article by doing a search for “how to get a bank account with bad credit,” but the truth is: the problem isn’t your credit. It’s your record of past behavior with banks. A consumer’s credit is monitored by the three credit reporting agencies. These are TransUnion, Experian, and Equifax. But when a bank wants to see if someone is reliable enough to manage a checking account responsibly they don’t check those kinds of reports. Instead, banks use a service called ChexSystems.
What is ChexSystems?
ChexSystems is a way for banks to learn how any given person has behaved in the past with checking accounts. Most large banks won’t check to see if someone has bad credit before opening a checking account for them. They will check the person’s ChexSystems report. If the report has bad marks in it, the bank will refuse the account. Things that hurt a ChexSystems report include:
- Bounced checks
- Unpaid bank fees
- Overdrawn accounts that still aren’t paid off
- Too many financial institution inquiries (that is: you’ve tried to open too many accounts at too many different banks and have failed)
- Check fraud or identity theft
Let’s say, for example, that someone named Anne racked up a lot of fees on a checking account three months ago and, instead of paying them, she abandoned the account. The trouble is, she hasn’t escaped her problems. Like speeding tickets when you move to a new state, your banking problems follow you — through your ChexSystems report.
Now, just because you have a bad ChexSystems report, that doesn’t mean everyone assumes you’re a criminal. You might be the victim of identity theft or you may have bounced some checks by accident. But that doesn’t change the bad marks in your report that are telling banks that doing business with you is just too much of a risk.
How to Fix A ChexSystems Report
Since 80% of banks consult ChexSystems (or another reporting service called Telescan) before setting up new checking accounts, a bad report can really hurt. Since bad marks on a ChexSystems report can stick around for years it’s hard to fix them. Even so, it can be done.
Consumers can view their ChexSystems reports for free by calling ChexSystems at 800-428-9623 or by visiting their website at www.ChexHelp.com.
Look for Issues
Next, read through the report and look for any issues. If the issues are as simple as unpaid bank fees, then fixing the report might be as easy as calling your old bank and offering to pay their fees. If you do this, keep in mind that banks aren’t required to remove black marks from your report. A good approach might combine politeness with saying “Hey, if I agree to pay those fees, will you agree up front to take them off my ChexSystems report?” You catch more flies with honey than you do with vinegar.
There may be errors on the report as well, or items resulting from the theft of your identity. In other words, things that aren’t your fault. These too are fixable, though it takes time. To fix mistakes in the report, you’ll need to send a letter to ChexSystems by registered mail, explaining the reason for the dispute. Work with the bank that reported you on this too, because ChexSystems will contact them for information. ChexSystems is required to respond in 30 to 45 days.
Some items on a ChexSystems report however, like bounced checks, may be impossible to erase. If that’s the case, you still have options.
CheckWise is an online class and certification that teaches consumers to use checking accounts responsibly. Taking the class won’t guarantee a bank will give you a checking account, but it will improve your chances. Banks view a CheckWise certification favorably, as a sign that a consumer is working to try to turn their financial behavior around. The class costs $25 and takes 2 hours.
Try a Small, Local Bank or Credit Union
Small, local banks and credit unions often don’t check with ChexSystems before granting checking accounts to new customers, so they might be a good alternative if for people turned down by a larger bank.
Open a Second Chance Account
If you’ve tried and failed to fix your ChexSystems report, and you’ve taken the CheckWise class but still can’t get a traditional checking account, a “second chance account” might work for you. Second chance bank accounts are specifically for people who’ve been flagged by ChexSystems. They’re considered high risk by banks. They usually carry monthly fees and/or minimum balances. They can often be upgraded to regular checking accounts once they’ve been used responsibly for a year or so.
Most major banks don’t offer second chance accounts. The one nation-wide exception is Wells Fargo. Local credit unions and small, local banks also often second chance accounts.
You might have trouble finding a good second chance account, particularly if you search online. On the internet, a thousand scam-artists try to snare unsuspecting people looking for second chance accounts. A program called Bank On (a collaboration between banks and state governments) can help you find a bank nearby that offers second chance accounts. Not all states have Bank On programs. To find out if there’s one nearby, go to http://joinbankon.org/programs/ and search their map-driven list.
Open a Debit Account
Many banks will let consumers open debit card accounts, even if they’re turned down for traditional checking accounts. BB&T, for example, offers a “Money Account” that comes with certain restrictions. Customers can only deposit cash, government checks, checks drawn off BB&T and paychecks by direct deposit into BB&T’s “Money Account.” The accounts can be used to pay bills and do anything else a checking account can do, except for writing checks. The fees are cheaper than most second chance accounts, too.
The Green Dot Card
Walmart offers a card called the Green Dot card that carries some advantages. For $3 or $4, anyone can buy a reloadable Visa debit card. It comes with an online bill pay service and accepts payroll direct deposits. The card can also be used to send money to friends. At $3 per reload and a $3 monthly fee, the fees are comparable to those on many second chance accounts — as long as the cardholder doesn’t reload it several times per month.
To sum it up, if you can’t get a checking account:
- The problem is your past behavior with other banks.
- Your ChexSystems report alerts new banks that you’re high risk.
- You can view a copy of your ChexSystems report once per year for free at www.ChexHelp.com.
- Read through your ChexSystems report. Then:
- Work with the bank that reported you to pay off old fees and debts, dispute issues, and get bad marks removed.
- Try again to open a new checking account.
- If you can’t fix your ChexSystems Report:
- Take the online CheckWise class ($25, 2hrs) to get banks to take a second look at you.
- Try a small, local bank or credit union instead.
- Open a “second chance account.” Some have high fees and/or require a minimum balance. You can find banks that offer second chance accounts at http://joinbankon.org/programs/.
- Open a debit account with online bill pay, or get a Green Dot prepaid debit card (also with online bill pay) from Walmart.