How to open a bank account with bad credit – and a look at Chexsystems

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How to open a bank account with bad credit – and a look at Chexsystems

By Editorial Team | 18th January 2019
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One-third of Americans have bad credit scores.

And if you’re in that demographic, you likely already know that having a bad credit score can negatively affect you in many ways. From making it difficult to get a credit card to being unable to get a loan, a bad credit score can affect many aspects of your life.

If your credit has gotten so bad that you’ve been banned from a financial institution, you might also have trouble opening up a bank account.

In this article, we’ll go over what Chexsystems is (the system that checks to see if you’re suitable for an account), and how you can open a bank account with bad credit.

Don’t worry, it’s not impossible. It just takes a little bit of know-how.

What is ChexSystems?

If you’ve never heard of ChexSystems before, you’re in good company. ChexSystems is a database that financial institutions can access to see if you’re a worthy candidate to bank with.

Not everyone gets reported to ChexSystems, but if you have a problem with your bank, your issue may go directly to them. For example, if you’ve had a series of overdrafts that you haven’t paid or you owe your bank money, they may report you to ChexSystems.

If you then try and score a loan or open up a bank account at another bank, you may be barred simply because you’re listed in ChexSystems as a problematic customer.

What kind of "behavior" can ChexSystems report?

Most people don’t end up on the ChexSystems list, but there are a variety of things that will land you on it. If you’ve repeatedly written bad checks, you have negative balances you haven’t paid off, overdraft fees you’ve refused or been unable to pay or if you gave false information when signing up for your bank account.

All of this activity can land you within the database.

How do I get cleared for an account if I'm on the ChexSystems database?

There are a few things you can do. Firstly, if you have any problems with your bank, you should clear those as quickly as possible. This will help you avoid going on the database, which is the best way to keep problems like this at bay.

But if you find yourself in the ChexSystems database, you do have options.

You’ll usually find out that you’re on the ChexSystems database if you try to open up an account and it gets denied. Or, the bank may offer you an account with limited options or higher fees.

Within 60 days of getting denied a bank account, you can contact ChexSystems via their website. They will give you a report of why you’ve been denied an account, or why you’ve been given a less than favorable account.

The report will also tell you how to rectify your account so that you can get off the ChexSystems database. After this happens, you should be able to open up a bank account as normal.

Sad man looking at his wallet with money dollar banknotes flying out away
Having bad credit can be stressful (Picture: iStock by Getty)
What if I can't afford to clear my ChexSystems account?

Don’t worry. This happens to a lot of people. Many people find that their ChexSystems clearance is more than they’re able to pay at the moment. This leaves them stuck with thinking they can’t open a bank account.

Depending on your ChexSystems score, a bank may allow you to bank with them. As we mentioned above, however, the fees will be higher. You may also be limited when it comes to the number of checks you can cash, the cash you withdrawal and other banking options. This can continue for a while, or until they feel you’re a trustworthy customer again. For many people, this can take 5 years or so.

And that can be a long time to operate with a bank account that has reduced functionality.

Can you open a bank account with bad credit that doesn't have limited functionality?

Yes. The way to do this is to open up an account with an institution that doesn’t use ChexSystems to monitor its account holders or potential customers.

While there are a few of these banks to choose from, such as First Convenience Bank and Renasant Bank, the best, by far, is BBVA Compass. In the next section, we’ll go over why this bank account is perfect for people who have bad credit.

Why choose BBVA Compass ClearConnect Free Checking Account?

The first and foremost reason to choose this bank account is that it doesn’t use ChexSystems. So, even if you can’t pay off your bank and rectify some of the past issues, you’re still free and clear to open up a bank account.

This particular account doesn’t require a huge deposit either. Instead, you’ll only need $25 in order to get on your feet. Once that clears, you’re able to start banking immediately.

You can use this bank for free at over 55,000 ATMs nationwide. It also allows you the extra convenience of using your account to pay bills, gives you a Visa Debit Card, and allows you to bank online.

This truly is the best and most flexible bank account for anyone who has previously had issues with their previous banks.

Is an alternative bank the best way to go?

When you open a bank account with bad credit, you must consider whether the bank will penalize you for your past issues. Many banks will, so it is important that you choose wisely. This is why an alternative bank account, like BBVA’s services, is the best way to go.

Are you wondering about getting a loan with bad credit? Click here to read our article all about it.

Written by
Editorial Team
Our Editorial Team is constantly watching for new and exciting services to report on. They aim to bring balanced, honest reviews to the site to give you the best comparisons and ensure you have the knowledge to choose the product right for you. Read more.
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