Bad Credit Checking Accounts

For hundreds of thousands of Americans with poor credit scores, the Chex System verification tool has proven to be an immensely powerful and potentially upsetting thing. A verification system that is widely used by many of the world’s top banks, the system offers background information on any and all customers for a retail bank that’s often used to determine their suitability for accounts.

For those with poor credit, the system can suggest a rejection, or at least a subtle move down to an account with less credit available. It’s a viscous cycle of poor credit for some – due to bad credit, a person may be unable to get any access to credit at all, which subsequently prevents improvement to their credit score in any form. For some, this lack of any credit can be financially paralyzing.

However, there are ways to get back on the checking account system, even with a credit score that is considered unhealthy by most banks. From bad checking credit accounts to comprehensive credit repair services, there are ways to get back onto the financial system. Whether you’re dealing with a failed credit card bill or other defaults, you can restart your financial life, one small step at a time.

Before we offer solutions for those with poor credit, let’s look at the reason banks may be rejecting your applications for checking accounts in the first place. Generally speaking, provided you fit any residential criteria – residency or citizen status, and a local address – opening a checking account is a fairly simple process. However, it can be slowed or stopped entirely for one of several reasons.

The first is a Chex System alert. The Chex System is a verification system used by banks to lower their risk of customers defaulting on their loans or checking account overdrafts. Banks submit any relevant customer information to the database and in turn alert other banks to their risks. The data stays published for five years, unless of course the bank decides that it will withdraw the entry.

That’s no issue – you may be thinking – I’ve since settled all of my overdraft expenses. Well, that may still be an issue. While the Chex System is amendable by bank staff, and in most cases, your account will be amended in the case of a late payment, it’s never completely removable purely due to a payment. Your account will still show up, albeit with a ‘paid’ stamp alongside its former file.

Appearing on this system is generally a five-year process, with your entry appearing for all banks to see for a period of five years. While this may seem like a financial lockdown – and in some cases, it is one – there are ways to access a checking account while you’re still on the system. First of all, it’s essential that you keep your other open checking and savings accounts in good financial standing.

This means ensuring that your checks don’t bounce, your balances never reach below zero, and that your account is regularly deposited into and withdrawn from. In short, it’s best to maintain a strong level of account activity with other banks, continually keeping your account in the black. This helps to signal that you are a good banker, and your Chex System file may be due to an isolated incident.

If you would still like to apply for a bank account while on the Chex System, you may find that you are limited to bad credit checking accounts. These accounts typically offer all of the privileges of an ordinary checking account, albeit without any form of credit whatsoever. You’ll still be able to carry out transactions and bank remotely, but you may not be able to write checks using your account.

These are available from both major banks – Chase and ETrade both offer checking accounts for people with poor credit – and from smaller online banks. The vast majority of bad credit checking accounts offer little to no check giving aspect. Due to the added risk of maintaining the account, a debit card is issued, but generally speaking no line of credit is extended to the account itself.

Is that a major blow? Not really, depending on the purposes of the account. If you plan to write out checks from your account, you may be able to do so after building up a lengthy banking history. It’s not unheard of for banks to extend small checking privileges to those with poor credit, but it tends to be a lengthy process, and one that’s built on a history of strong performance and financial trust.

Larger banks such as Bank of America also offer checking accounts for people with poor credit, and many of their accounts include the option to gain a checkbook too. It’s worth noting that accounts at Bank of American can require fairly steep minimum deposits also, presumably due to the added risk of taking on a client with a history of check-related expenses, unpaid overdrafts, or bounced checks.

While being on the Chex System can seem like a financial death sentence, it’s really a five-year penalty that’s far from financially crippling. From bad credit checking accounts to slow account history building with your bank, there are numerous ways to repair ‘broken’ checking history. In many cases, it’s all about building new history, and showing that you are a good bank customer.

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