It’s certainly a frustrating experience to be denied a checking account, but you can find out why you were rejected and take steps to get approved. The truth is, your bank account application could be denied for many reasons. Maybe you had some issues in the past (say, closing an account with a negative balance) or perhaps there’s just a plain old mistake in your record.
Whatever the case, you probably want to repair the situation ASAP. Having a checking account is a hub for many people’s financial life. It’s where your pay is likely deposited and how you pay your bills.
So let’s take a look at:
• Why your bank application was denied
• What your ChexSystems record might have on file
• How a second-chance checking account could help
• Steps to take before reapplying for a checking account
Reasons Why You May Be Denied a Checking Account
Are you wondering, “Why was I denied a checking account?” There are a few reasons that could be the determining factor in this situation. Many people wonder if they can be denied a checking account because of their credit score. Typically, banks don’t pull your credit report when you apply for an account. Your credit score is a measure of your creditworthiness; how well you do in terms of borrowing and repaying money, from whether you pay your utility bills on time to whether you have credit charge offs on your cards.
What they do look at is a similar record but for how well you have handled your banking life. Consumer agencies provide banks with information about your prior checking account activity. ChexSystems is one of the most well-known of these banking reporting agencies. It collects information from banks on your checking account activity and assigns you a score depending on how well you manage your bank accounts. The banks use this score to decide whether to qualify you for a checking account. If you have a poor score (we’ll share more details on that in a minute), you may be denied.
But your ChexSystems report is not the only reason a bank may deny you a checking account. There might be a simple error in your personal information. For example, your name might be spelled wrong or your Social Security number could be incorrect. The bank will try to electronically verify these data with a third party, and any errors will cause the application to be rejected.
You will also have to provide proof of identity, such as a copy of your driver’s license or passport, and if there are discrepancies between the documents and the information typed into an application, the application may be rejected.
Let’s now take a closer look at what might be responsible for your being rejected for a checking account.
Recommended: How Often Should You Monitor Your Checking Account?
Negative Information on ChexSystems
Negative items on your ChexSystems report may get you denied for a checking account. They can cause banks to consider you a high risk for financial services. Negative information that could cause your application to be rejected include one or more of the following:
• Forced account closures
• Bounced checks or overdrafts
• Suspected fraud or identity theft
• Unpaid fees or negative bank balances from a current or closed accounts
• Too many account applications submitted over a short period
These negative marks on your record can last up to five years.
Errors on Your ChexSystems Report
Just as you may have credit report errors, so too can your ChexSystems report have mistakes. This could trigger your bank account application to be rejected, even if your past checking account management was good. You can obtain a copy of your ChexSystems report once a year or whenever your application for a bank account is denied. (Keep in mind, though, that applying for a bank account too many times will be a black mark against you. If you get rejected, it’s probably a good idea to investigate your banking report vs just putting in more applications.)
If you are denied a bank account, check whether simple errors on your ChexSystems report could be the reason.
Your credit score can affect a bank’s decision regarding a checking account. ChexSystems collects data related to both debit and credit accounts, and a low credit score may play a role. If unpaid debts and fees are reported to a collection agency, and that information finds its way to the credit reporting bureaus, your credit score will be negatively affected.
Recommended: What Is Considered a Bad Credit Score?
If you have filed for bankruptcy, the bank will find out when it checks your background. Depending on the bank’s stipulations, they may decide that you are too much of credit risk to offer you a bank account. Your borrowing capacity will be significantly limited by bankruptcy, as will the number of financial institutions willing to provide you with financial services, such as a checking account.
Identity Can’t Be Verified
An application for a bank account may be rejected simply because there are mistakes and/or the information entered does not match the documents you submitted. For example, if you have recently moved, the verification source may not recognize your new address, or you might have answered security questions incorrectly when prompted by the verification system.
Here are other reasons your identity might not be verified:
• Your submission had an error or typo.
• Your credit profile may contain erroneous information.
• Your credit report could be frozen if there is suspicion of fraud or identity theft.
• Your documents may have expired.
• Your documents may be unreadable.
• You may have submitted a phone number that is not associated with your address.
Recommended: How To Read A Credit Report
Ready for a Better Banking Experience?
Open a SoFi Checking and Savings Account and start earning 4.50% APY on your cash!
Alternative: Second-Chance Checking Account
So let’s say your bank account application was denied. How do you get that checking account that you need? Here’s one route: Some banking institutions offer a second-chance account for those denied a traditional checking account. A second-chance account provides limited services, but it can help improve your financial life if managed responsibly.
These accounts often come with high fees, but you can upgrade a second-chance account to a regular checking account within a year or two if you pay the fees and maintain a positive balance. These accounts can help you on your path to building a solid banking history.
Steps to Take Before Reapplying for a Checking Account
If you’ve been denied a checking account, you may well want to apply elsewhere immediately. But a word of warning: Doing so could cause your application to be rejected if you request a new account too often. To maximize your chances of success, take the following steps before you reapply.
1. Find Out Why Your Application Was Denied and Ask the Bank to Reconsider
By law, the bank should tell you why your application was denied. Regardless of the bank’s information from a reporting agency, the bank makes its own decisions when approving account applications. You may be able to overturn the bank’s decision depending on the circumstances. It’s probably worthwhile to make that request.
2. Check Your Banking Report
You can obtain a copy of your ChexSystems report once a year and whenever you are denied a bank account if the report is the cause of your rejection. Visit the ChexSystems’ website or call 800-428-9623.
3. Look for Errors and Fraudulent Activity
Once you have your ChexSystems report, look for fraudulent activity or mistakes in information such as your name, address, phone number, or Social Security number. For any errors contact the agency, and be ready to provide supporting information to ensure the issue gets corrected.
4. Clean Up Your Report
Look at the negative actions on your report and fix them; you can file a dispute for anything erroneous by going to the ChexSystems website. Pay off any debts and unsettled fees. Ask to have the negative activity removed. Otherwise, they can stay on your report for up to five years.
Having your application for a bank account denied is an upsetting experience that can definitely limit your financial life. The root of the problem could be that ChexSystems or another consumer reporting agency has given the bank information indicating that you are a high-risk customer. But your application could also have been rejected because mistakes were made or your identity couldn’t be verified. By taking steps to remove errors and repair damage, you’ll be on the road to get the accounts you need to keep your money safe and keep your financial life humming along.
When you’re ready to apply for bank accounts again, check out what SoFi has to offer. When you open our linked Checking and Savings account with direct deposit, you’ll get an array of benefits that make banking a breeze and help your money grow. You’ll earn a competitive APY and pay zero account fees. Plus, you’ll have access to your paycheck two days early.
Can you get a bank account if you’ve committed fraud?
If you have committed fraud, you will likely have a history with ChexSystems, and you are likely to find your bank account application declined. However, you can get a second chance checking account. If you maintain a positive balance and pay the monthly fees, you can probably upgrade to a regular checking account within a year or two.
How do I get my bank account after being blacklisted?
ChexSystems will blacklist you if you show a pattern of questionable behavior like failing to pay fees or committing fraud. You can try to remedy the record by paying off debts, but otherwise, your record could be with you for up to five years. You can seek out a second chance loan and hope that you can upgrade to a regular checking account within two years if you manage your account responsibly.
How long do fraud investigations last?
There’s no formal limit on the length of an investigation. Typically, they take about 45 days. But remember, if you are found guilty, that negative information can stay on your ChexSystems report for up to five years.
Photo credit: iStock/skynesher
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.
SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 8/9/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
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.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.