Do Banks Run Credit Checks for a Checking Account?

If you’re wondering whether a bank checks your credit when you open a checking account, the answer is typically no…but there’s more to the story than that one little word!

Your credit score is probably top of mind when you’re considering this question. For good reason: You probably already know how important those three little digits are. Your credit score is usually looked up (and can impact the outcome) when you apply for a lease, open a new line of credit, take out a loan, and even try to qualify for a job.

But when it comes to starting a new checking account, banks don’t usually check your three-digit FICO® score — the most common score used by lenders — in order to determine your eligibility to open a checking account. They do, however, often look into your banking history.

Let’s take a closer look at credit checks when opening an account and what could prevent you from getting that approval you’re after.

Whether or Not Banks Run Credit Checks for Checking Accounts

Let’s start at the beginning. What, exactly, is a credit check? When most lenders and other authorities check your credit, they’re looking at that three-digit FICO score mentioned above — the one that ranges from 300 (poor) to 850 (exceptional). They will likely also receive your entire credit report, which is a lengthy, detailed document listing all your open accounts, their statuses, and several years of your historical behavior around loans and credit, among other items. By historical behavior, we mean things like whether you pay your bills on time or late, how much debt you’ve managed, and whether any debts have been put in for collection.

Incidentally, when your credit is checked, it can be either a soft or hard credit inquiry. The former are inquiries that don’t impact your precious credit score. But the latter can wind up lowering your score because these “hard pulls,” as they are sometimes known, can indicate that you are shopping around for more credit, which can make you look like a risky prospect.

But back to our question about whether a bank will initiate a credit check…the answer is: not exactly. They don’t typically check your credit score. Instead, they use their own kind of financial background check system. It’s called ChexSystems — and it’s a reporting agency similar to but distinct from the ones that record and report your credit score.

What Is ChexSystems?

ChexSystems is a reporting agency that focuses not on your behavior around loans and credit, but around banking. Your ChexSystems report will include your history of overdrafts, negative balances, and bounced checks, as well as any instances of fraud, security freezes, and other items specifically to do with your banking history.

So while it’s not a credit check, per se, it is like a credit check. What’s more, there are circumstances where your ChexSystems report could disqualify you from opening certain types of bank accounts. Like any other reporting agency, ChexSystems is required by the Fair Credit Reporting Act (FCRA) to issue consumers a free report once a year, so you can regularly check in and see how your history looks. If any of the negative items on your report are fraudulent, you can dispute that information with the agency to get it removed — and if they’re legitimate, you can work toward improving the behavior that caused them. (Most information on your ChexSystems report falls off after five years.)

Worth knowing: There are also deposit accounts that don’t pull ChexSystems reports. So even if you’ve got some negative history, it’s possible to turn over a new leaf and work toward a more positive relationship with banking.

Why Do Banks Run Credit Checks When You Open a Bank Account?

Now that you know how credit checks work, you may wonder, Why do banks run credit checks when you want to open an account? Isn’t that their whole reason for being, to give people checking and savings accounts? Well, yes, in part, that is what they do, but consider this angle. While banks don’t loan you money when you open a checking account, they do rely on their customers to keep their accounts in the black — and to pay fees, ensure checks don’t bounce, and generally be responsible bankers.

Using ChexSystems gives banks an idea of how you might behave as a banking customer in the future based on your recorded behavior. The intel in ChexSystems can also help a bank disqualify you from obtaining an account if they don’t think you pass muster.

Does It Hurt Your Credit Score When Trying to Open a Bank Account?

One exciting corollary to the fact that banks don’t pull your credit score when opening an account: Opening a bank account won’t hurt your credit score, since there’s no hard credit inquiry involved. That’s comforting news to anyone opening a new account. It also means you can even open a bunch of different checking and savings accounts (perhaps you want a regular checking account, plus one for your side-hustle income, as well as a savings account for your emergency fund and one that holds cash for a vacay you’re planning), and you won’t torch your rating.

Stressed about your credit score and not loving where it’s lingering? Improving your credit score is definitely an important step toward plenty of financial goals, and the behaviors you cultivate in order to do so may improve your ChexSystems report as well. Moves like lowering the amount of debt you carry, paying bills on time all the time, and not opening too many lines of credit can really pay off in terms of boosting your score.

Reasons Why You Might Be Denied a Checking Account

Unfortunately, every now and then, people do get that big red “rejected” stamp when they apply for a bank account. For banks that use ChexSystems when determining whether or not to issue you an account, these are some of the reasons for a denial.

Unpaid Negative Balance on a Previous Bank Account

As mentioned, banks aren’t officially loaning money to checking account holders — but if you maintain a negative balance on an account and never pay that money back, the financial institution is on the hook for that loss. For this reason, negative balances on existing or previous accounts can spell rejection when you’re applying for a new one.

Abusing Overdraft Privileges

On a similar note, overdrafting again and again taxes a bank’s ability to stay in the black on your account. That goes double if you’ve avoided paying overdraft fees or other charges associated with your behavior.

Fraudulent Activity on Previous Accounts

ChexSystems records suspected fraudulent activity — which, obviously, is not something a bank wants to have to deal with in the future.

Having a Joint Account With Someone Who Has Negative Unpaid Balances on Their Accounts

When you have a joint bank account, your partner’s behaviors can affect your standing as much as your own. So even if it’s not you who’s wreaking havoc on your bank account, their negative unpaid balances, overdraft abuses, and fraudulent activity could also stand to mark up your ChexSystems report.

The Takeaway

If you’re sweating whether opening a bank account can involve a credit check that deflates your credit score, take a breath! You’re okay: Most banks don’t pull a hard credit check to qualify you for a checking account. However, they might look into your ChexSystems report, a banking-industry way of peering into an applicant’s history. Certain negative items can disqualify you from opening a bank account (an unpaid negative balance, for instance). Still, there are banks out there that don’t use ChexSystems to qualify their customers.

Guess what? SoFi’s one of them! SoFi Checking and Savings offers no fees and high interest-earning potential, with no ChexSystems report required. We call that a win-win!

Better banking is here with up to 4.20% APY on SoFi Checking and Savings.

FAQ

Do banks check your credit score when opening a checking account?

While banks don’t check your FICO score to qualify you for a checking account, they may check your ChexSystems report. This is similar to your credit report but focused specifically on your banking history.

Can you be denied a checking account because of bad credit?

You likely won’t be denied a checking account because of bad credit directly. However, if you have bad credit, you may also have negative items on your ChexSystems report that could disqualify you from some (but not all) bank accounts.

Why would a bank deny a checking account?

A bank might deny your request for an account if you have negative items on your ChexSystems report, such as fraudulent activity, negative balances, or unpaid overdraft charges.

---

Photo credit: iStock/MicroStockHub

SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
SOBK0222033