Recently on our bankruptcy forum a user asked, “I have a spotty credit history. I have had some issues with my banking practices including frequent over drafts. I also wrote a few hot checks several years ago. Recently I went to open a checking account and was told I didn’t qualify. What gives? Can a bank just decide that you cannot bank there?”
Banks deny checking account to customers
Banks, like any other businesses, are in business to make money. If they see you as a risk or you have cost them money in the past they can deny you access to banking. In fact, according to CNN Money, banks routinely deny up to 15% of banking applicants regular checking and savings accounts.
So how do they know if you are a bad risk? Like other creditors who review information from the three main credit bureaus prior to lending money, banks also have companies they can contact to find out your banking history.
The two main companies are Early Warning Services (1-800-325-7775) and ChexSystems (1-800-428-9623). Each of these companies maintains a report on you with information such as non-sufficient funds overdrafts and unpaid bank account liens.
Under the FCRA, information for banking mismanagement may be retained and reported on your banking report for up to seven years. Unfortunately, this negative information can limit your ability to open a banking account.
What can I do if a bank won’t give me a checking account?
So what can you do if you attempt to open a savings or checking account and you are denied?
- Review your banking report
Both bank reporting companies are governed by the Fair Credit Reporting Act (FCRA), and they are required to provide information to you about your banking report. Just like you have the ability to review your credit history by requesting a credit report from the three credit bureaus, you also have the right to request a copy of your banking report from ChexSystems and Early Warning Services.
Like credit reports, individuals are entitled to one free copy of their report every 12 months and any time a report is used against a consumer to deny banking services.
- Correct any errors
After reviewing your banking information, if you do find any mistakes, you will also have the ability to correct them. Information about how to challenge the disputes should be provided by the reporting agency. Additionally, all disputes should be done in writing with supporting information included.
If the information is correct you can also work directly with the banks to pay off your debts.
- Talk to the bank about the rejection
Although banks may have general rules about denying certain customer’s accounts, in some cases, banks may decide to allow you to open up an account. Remember, it never hurts to ask them to reconsider their decision.
- Talk to the bank about a second chance account
Although some banks may deny you access to a traditional savings or checking account, some banks may offer some other type of nontraditional or “second chance” account that allows you to bank with limited options.
If this is an option be prepared for certain banking limitations. For example, banks may decide to limit your transactions to debit card transactions with limited withdrawals (i.e., overdrafts are not allowed).
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