According to a 2012 report released by the Federal Deposit Insurance Corporation, about 10 million Americans don’t have bank accounts. There are a variety of reasons why people would not have a checking or savings account, including personal preference, but many people don’t have bank accounts because they cannot get approved for one. Here are two reasons why you may be denied a checking account, and what you can do to get around these obstacles.
Previous Accounts Closed for Misuse
If you previously had a bank account that was closed for mismanagement (e.g. unpaid overdraft fees), it’s likely that account has been listed with a consumer reporting agency that specializes in notifying banks about potentially risky customers. Though most banks do not conduct regular credit checks on customers when they want to open a checking account, they do check the databases of specialty third-party companies that provide information about a person’s activity with other banks. If your name lands on any of these databases and is associated with adverse activity, then the bank will typically decline your application.
Banks are required to tell you about any credit reporting services they used that factored into their decision. These third-party consumer reporting agencies are regulated the same way as the 3 big credit reporting agencies, so the companies are obligated to furnish you with a free report showing what type of information they have on file for you.
Take advantage of the bank denial to contact the company and get a copy of this report. If the report is riddled with mistakes, which many times they are, go through the dispute process to get those errors cleared up. On the other hand, if the information is accurate, you can approach the bank who reported the account and negotiate a way to get the information removed or wait for the entry to expire (usually about 7 years) before applying for another account.
Some banks do run credit reports on potential customers for checking accounts. In some cases, the bank may pull a credit report if it finds the customer has negative information on a consumer bank history report. In this situation, the bank may still open the account if the customer has good credit. In other cases, the bank may rely solely on a credit report and decline to open the account if the customer doesn’t have a high enough credit score.
There are a couple of different ways to resolve this issue. If you don’t have a poor banking history, shop around for a different bank that doesn’t require you to have good credit to open an account. If you really want an account at a particular bank, ask if the bank will open the account if you put someone with good credit as a joint owner on the account to act as a guarantor.
Checking Account Alternatives
If you’ve hit a double whammy (both bad credit and a bad banking history), all is not lost. There are still ways you can get a banking account to help you manage your finances. One option is to look for a bank that offers second chance bank accounts. These are special accounts designed specifically for people with troubled banking histories.
Typically, these accounts are offered with special conditions. For example, one bank requires customers to complete a 90-minute money management course before they can use their accounts. Others may put restrictions on the account, such as not allowing the account owner to use overdraft protection. However, if you manage your account responsibly for a period of time, these banks will often let you switch over to a regular account with lower fees and no special conditions.
For more information about getting approved for a checking account or bank account alternatives, contact a financial institution near you. You can also visit www.titansbanking.com.