What to Know if You’ve Been Denied a Checking Account
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
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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.
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