Bank accounts are easier to approve than credit cards, but it is still possible to be refused an account if you have a bad credit history. But don’t let rejection put you off, there are other ways to secure a current or savings account.
Know why you were rejected
If you’ve been rejected, it’s likely due to something bad with your credit history. Services such as ChexSystems Consumer Reports or Early Warning Services look for “negative actions” that include:
- Bounced checks
- Unpaid fees
- Credit inquiries
- How many checks you ordered
- Cases of check fraud and identity theft / fraud
- Unpaid negative balances
- Excessive withdrawals
Once you know which negative actions led to your denial, you can make sure they are legitimate, and then start working to correct them.
Ask the bank to reconsider
While bankers use consumer reports to screen applicants, they are free to approve or reject new accounts as they see fit. You may be able to get the bank to reconsider its decision and allow you to open an account. Also, keep in mind that federal law requires these institutions to disclose Why you have been rejected, so ask for that information as well.
Get a copy of your report
If you are unable to have your decision reconsidered by the bank, ask for a copy of your ChexSystems‘ or Early warning services report. To do this, you will only need your current address, your social security number and the address of your residences for the past five years. After completing the application form, the report will be mailed to you within five working days.
Check for errors in your report and dispute them
Next, review your reports for any fraudulent activity or discrepancies, as you could be the victim of an error or even fraud. If you review your report and see incorrect or out of date information, you can also submit a dispute with either ChexSystems or Early warning services, as well as your financial institution.
However, if your report is correct and you owe money, you will need to pay off those debts before they can be taken off the report. Otherwise, negative entries can stay on your report for up to five years.
Search for “second chance” accounts
Some banks offer second chance accounts for those with bad credit and banking history. For these accounts, banks do not consider your consumption report or negative activity to qualify, so it is easier to get approved. As a result, the fees tend to be higher. Another option is to apply for a bank account with a credit union or small bank, as some of them do not subscribe to ChexSystems.
Temporarily use a prepaid debit card
If you’re still having trouble opening a bank account, ask for a prepaid debit card, which must be pre-loaded with a certain amount of money. The card offers some of the functions of a regular bank account, such as paying bills and transferring money to other people. Over time, you can pay off your debts or wait for your “negative stocks” to expire so that they no longer appear on your consumer reports.