If you've had a problem with a previous checking account, you may be looking
for a bad credit checking account. Despite the widespread use of credit cards,
Americans still write millions of checks every year. But if you've bounced some
checks or closed a bank account with an unpaid balance, you may have difficulty
in opening a new account.
Why Banks Check Your Banking History
Each year, financial institutions are hit with bad check losses of over a
billion dollars. In order to cut these losses, banks and credit unions check
out the prior banking activity of people applying for new accounts.
Approximately 80% of all checking account providers rely on the services
of the ChexSystems, a consumer reporting agency, for this information.
What Information is Kept
Every institution that uses ChexSystems also supplies it with data from its
customers' accounts. The most significant information kept is the record of
closed accounts. Banks and credit unions report accounts not closed by the
account holder. These are called "closed-for-cause" accounts. Usually this
type of account closure is due to fraud or an overdrawn account left unpaid.
This closed account information remains on the report for 5 years.
Additional ChexSystems report information shows if accounts have had checks
lost or stolen. This alerts institutions for the possibility of bad checks
drawn on a closed account. Other items listed include an account holder's
Social Security number, driver's license number, any outstanding unpaid checks,
and the number of checking accounts applied for in the last 90 days.
Is There an Error in Your Report?
You may think you need a bad credit checking account when actually you were
denied an account as the result of an error. As a consumer reporting agency,
ChexSystems is required under the Fair Credit Reporting Act to maintain
accurate records. Under the FCRA, you have the right to dispute any report
item that you believe is in error. ChexSystems is then obligated to investigate
any non-frivolous dispute and if necessary, correct the item. You also have
the right to include a statement with your report, explaining the reason for
any account closing.
If you've been turned down for a checking account in the last 60 days
because information in your report, you may get a free copy of your report
by calling 1-800-428-9623. You can also get a free copy if you live in
Colorado, Georgia, Maryland, Massachusetts, New Jersey, or Vermont.
If this doesn't apply to you, you may purchase a copy for $8, or less,
if you live in Connecticut or Maine.
Do You Need a Bad Credit Checking Account?
If you haven't written any bad checks in the last 5 years, you should have no
problem opening a checking account. And even if you have, it doesn't mean
you can't get an account. Banks often rely their local branch manager to
determine their account standards. Except for cases of fraud, some banks
don't consider the record of closed account older than 3 years.
Your bank will usually take into account if you have a reasonable explanation
for any problems. And remember 2 in 10 financial institutions don't use the
ChexSystems service. So check around and you'll find what is a bad credit
checking account for one bank, is perfectly acceptable to another.