If You've Been Denied a Checking Account...
April 23
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denied checking account by Pete Low

Yes, you can be denied a checking account, even if you're not in Chexsystems, and even if you've never been overdrawn! Banks are supposed to provide a service and make money, and you just want to be their customer, but some banks are refusing to give you a checking account now, even if you've never done anything wrong, just because you have a low credit score.

A friend of mine was turned down for a checking account, even though he's never bounced a check in his life. The bank told him he had a credit score of 640, so too bad.

Sometimes you won't even find out right away. They may let you open a checking account normally and you think everything's cool. Then a few weeks later, you might get a letter in the mail telling you they've closed the account and are returning your money.

Why, and What To Do

Here's why you can be denied a checking account, and here's what you can do about it.

Not all banks will run a credit check when you ask to open a checking account, but some do. If you open the account online, they may be more likely to, just to find out more about who you are. A credit score of 650 or below is where you may run into problems. To add insult to injury, if the credit check is considered a "hard pull," the credit check itself may lower your score by a few points.

If you're worried about a low credit score, there's no way to know for sure whether a bank will look at your credit report.

You can ask them before you apply, but it's possible the person opening the account may not know, if the credit check is done by the bank's fraud or loss prevention department. Still, if you're worried about a low credit score, it's worth asking before you apply. You don't even need to let them know your score may be low. Just say you don't want another hard pull on your credit report. Lots of people even with high credit scores don't want that, because every inquiry can lower it a point or two.

Not Just Chexsystems

Even if they don't look at your credit score with the big three credit bureaus, TransUnion, Equifax or Experian, they'll probably look at another kind of report, so if your credit is good, you may still run into problems if you've ever bounced a check or closed an account with fees still due.

A surprising number of companies are in business to do nothing but spy on your banking habits. Chexsystems is one of the most well-known, but Telecheck is another, and you may also run into the name QualiFile, which is offered by Chexsystems. There are other companies which keep track of bounced checks, too. Stores use them for deciding what checks to accept, and banks may use some of them also, in connection with opening checking accounts. See the list on this page. I notice they left off another one: EWS (Early Warning Services), owned by Bank of America, BB&T, JPMorgan Chase and Wells Fargo.

All these companies are selling their services, so they pressure banks to buy and use their reports, since they make money every time a bank spies on you.

Even though banks need customers, they tend to be cautious, especially after the big banking crisis when people were defaulting on mortgages and the banks needed bailed out. They don't always want your business, if it doesn't fit what they're looking for. So they have loss prevention departments that try to sniff out people who might write bad checks or otherwise cause headaches. Having a low credit score obviously doesn't mean you're dishonest, but it worries them. They worry easily. Finding a report that says you wrote a few bad checks in the past, or closed an account with fees dues, worries them even more, even if it was a couple years ago.

If you're denied a checking account due to a report from Chexsystems or another similar company, you'll get a statement from the bank with contact information for whoever supplied the report. The bank probably won't tell you exactly what made them deny you, so they may just say something vague like "due to information in your credit file," but you can try asking them what the problem was. Chexsystems offers this page with a list of common problems.

Also, by law, you can also find out what report they used and look at it to make sure it's accurate. If the report is from Chexsystems, here's an article with more information on dealing with them, including how to contact a live person at Chexsystems by phone, if mail and recordings aren't working for you. If it's one of the other companies, the bank should supply their contact information. All of them are required by the Fair Credit Reporting Act to let you look at your report and correct any mistakes on it.

checking account

Remember, it wasn't Chexsystems or any other reporting agency that turned you down. It was the bank, using the information they were given. So there's also a chance that you can talk to them and explain the situation. If they see a flurry of bounced checks three or four years ago, you might be able to explain that you were in the hospital then, or some other one-time reason that will make them realize you probably won't do it again. Credit unions are sometimes more forgiving than banks.

Identity Theft

If you're denied a checking account even though you believe your credit score is high enough and you've never had a problem with a previous bank account, it's possible an identity thief has got hold of your information and is opening accounts in your name, to launder money, defraud banks, or who knows what. Here's what the FTC recommends, if that's the problem: Denied checking due to identity theft.

If You're Still Denied

First, don't keep trying. Banks can see how many Chexsystems (or other) reports have been run on your account, and it makes them nervous if too many have been run recently, since it looks like other banks are turning you down too.

Look instead for other alternatives to a checking account. After five years, your reports will age off Chexsystems records, and by then you may be able to raise your credit score, too.

But still, you probably need some kind of checking account in the meantime, to make it easier to get your paychecks cashed, to have a debit card to pay bills online, or a way to pay bills by mail without buying a money order.

Second chance checking accounts or checking accounts for people in Chexsystems or with bad credit, are made for people like you. Some offer a prepaid debit card that lets you pay online or with the debit card at a store, but may not allow you to cash or deposit your paycheck or may not have other perks like online bill pay.

Others work just like regular checking accounts, with all the bells and whistles, except they may charge a monthly maintenance fee, may charge more for some services, or they may require you to have your paycheck directly deposited, or other requirements worth finding out about. Still, it's better than no checking account at all, and some may allow you to upgrade to a regular, cheaper checking account after you've established a good reputation with them.

Banks offer second chance checking accounts online as well as in person. Search for "second chance checking," or ask at a local bank or credit union what options they offer for people who've been turned down for a regular checking account. You can also take a look at this article on getting second chance checking.

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7:11 p.m. April 23
It's not fair that everybody checks your credit score. When I applied for a job, I had to give them persmission to do it, and my credit score doesn't have anything to do with how well I can do a job.


8:48 p.m. April 23
Sucks, doesn't it? I can maybe see a connection between opening a bank account and a credit score, but honestly, somebody with a bankruptcy a few years ago isn't necessarily going to start writing bad checks today. Lots of people have low credit scores even though they've handled their day-to-day finances well, because all it takes is one big thing--major medical bills, a foreclosure on your house--and suddenly your credit score is in the toilet, even if you've never overdrawn a checking account.


11:15 a.m. April 24
I bounced a check because the bank tried to take the money out before the date on it. I postdated it on purpose, because I knew there wouldn't be enough money until my paycheck deposited. It cost me $35. Isn't that illegal, trying to cash a check before the date and then charging me a fee because it bounced? Duh. They should have known it would bounce. That's why I post-dated it.


6:57 p.m. April 24
Hate to say it, but I think the bank can do that. If you write a post-dated check and give it to somebody, and they take it into a bank, the bank can try to take the money out of your account even before the date, and charge you a fee if it bounces. Here's what the U.S. Dept. of the Treasury says: Link. And here's a lawyer's opinion, that does offer some advice.


9:44 p.m. April 25
If it's a debt collector that you gave a post-dated check to, see section 808, "Unfair Practices" here, especially paragraph (4): http://www.fdic.gov/regulations/laws/rules/6500-1300.html The bank can still try to take the money out of your account, but the debt collector is the one breaking the law if he tries to deposit it before the date, or even threatens to.

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