Big financial decisions often involve a credit check. Looking to buy a house, take out a student loan, open a new credit card? Generally, the lender will run a credit check.
What if you want to open a bank account and your credit isn’t in the best shape? Unfortunately, most traditional banks may turn down your request to open an account if you have either bad credit or a ChexSystems report: more on each of these below. But, this doesn’t mean you can’t open a bank account.
Here we’ll explore the relationship between bad credit, ChexSystems reports and the opening of a bank account; how you can open a bank account with bad credit; and what to look for when opening a bank account with bad credit.
Why is a bank turning down your request to open an account?
A poor credit score or a ChexSystems report could be the reason why you are unable to open a bank account. Let’s dive into what these two things are and what they mean in terms of opening a bank account.
Traditional banks may check your credit score with an inquiry through one of the three major credit reporting agencies: Equifax, Experian, or TransUnion. A hard inquiry most often occurs when you apply for a new loan or form of credit, and the person or company you are borrowing from formally requests (or “inquires”) about your credit history. Companies inquire about your credit history to better understand how well you’ve paid back previous loans and use this information to decide how much they are willing to loan to you and at what interest rate.
While your interactions with lenders aren’t a direct indication of how you’ve interacted with banks and your previous deposit or savings accounts, some traditional banks will still check your credit score. A bad credit score could be one of the reasons you are turned down from opening a checking account at a traditional bank.
Similar to the relationship between your credit score and lenders, a ChexSystems report details any negative information about your previous banking relationships. ChexSystems reports indicate if you’ve had overdrafts, non-sufficient funds activity, or any other negative information about the deposit or savings accounts you’ve had at other banks. Not everyone has a ChexSystems report. This report is only returned for negative activity.
When applying for a new bank account, the bank may run a ChexSystems report. If a report is returned on your banking history, this could be one of the reasons you are turned down from opening a deposit account at a new bank.
It’s important to remember that a ChexSystems report and your credit score aren’t related. You can have a ChexSystems report, but you can also have excellent credit. Similarly, the opposite is also true. You can have a bad credit score but no ChexSystems report.
ChexSystems reports relate solely to your previous banking relationships, while your credit score is a reflection of your previous borrowing activities.
How can you open a bank account with bad credit or a ChexSystems report?
If you’ve been turned down when trying to open an account due to either a poor credit score or a ChexSystems report, hope is not lost.
When looking for a bank when you have poor credit or a ChexSystems report, consider the following:
Look for banks that don’t perform a credit check
While your traditional brick and mortar banks may run a credit check by relying on the major credit reporting agencies (Equifax, Experian and TransUnion), there are other banks, such as online banks, that will not run a credit check.
As an example, Porte is one of those banking solutions that does not rely on credit checks or ChexSystems reports in order to determine if you qualify to open a bank account established with MetaBank,® N.A., Member FDIC.1
Look for banks that don’t charge monthly fees
If your credit is already in trouble, having to pay additional monthly fees likely won’t help you recover from the difficulties you may be having paying off your current loans.
You work hard for your money, and therefore you should spend it when and how you want to. Porte doesn’t charge monthly fees.2 We believe your money should stay in your pocket.
Look for banks that don’t require a minimum deposit
Some traditional banks will require a minimum deposit to open or maintain a deposit account. It’s important to look for banks that don’t require a minimum deposit.
At Porte, no minimum deposit is required to obtain banking services from MetaBank,® N.A. You have enough to manage when it comes to your money, and minimum deposits or account balances shouldn’t be something you need to worry about. With Porte, you can start today with the money you have.
Consider applying for an account today using the Porte app.3 Being human isn’t just about money, but about looking out for one another.
Porte is a mobile finance app committed to helping members navigate a path toward financial freedom. Porte’s business was founded on the idea that transparency can be brought back to banking. No matter where you are on your financial journey, Porte has the features and resources to help you along the way.