Bank account bad credit can be fixed.
It’s important that consumers maintain a checking account in good standing, since failure to do so will often result in a credit denial for many types of credit.
When you go into a bank and apply for a new checking account, the bank will often perform an inquiry on your credit report (Experian, Trans Union, or Equifax), as well as contact the main clearinghouse for checking account reporting, ChexSystems.
ChexSystems is technically a credit reporting agency as defined by the Fair Credit Reporting Act, so if you’ve been denied by a bank for bad credit entries that have been reported in ChexSystems’ database, you can challenge them as you would any other credit reporting agency, using credit the repair techniques found in the BestCredit book.
What Chexsystems and others report.
Banks are losing about $1.6 billion a year to bad checks as of this writing, so they’ve taken steps to ban what they consider abusers of the system. Furnishers report adverse consumer history to ChexSystems as a method of enforcement. Such information includes the following and can result in new-account denial:
- Forced closure of a consumer’s account as a result of nonpayment, bounced checks, or overdrafts
- Multiple overdrafts
- Savings account, debit card, or ATM abuse
- Providing false information when opening an account
- The consumer’s reporting of lost or stolen checks (shared with banks to prevent losses against a closed account)
- Attempts by consumers to open more than one account in less than three months (considered a red flag for account theft and money laundering)
- Outstanding debts, checks, and payment plans set up when the bank was unable to collect for an overdraft or a payment it honored on insufficient funds (the amount being insignificant)
Again, ChexSystems is technically a credit reporting agency as defined by the FCRA, but it stores data related to checking account history. The de facto standard in checking account reporting performed by banks and credit unions, ChexSystems serves 80 percent of America’s financial institutions.5 The list remains active for five years.
Get Checking is now defunct, but other options exist.
There used to be a program called “Get Checking,” offering a second chance for those reported to ChexSystems, but that educational program is now defunct. However, for those that didn’t owe large sums and paid back the debt, there still may be a second chance account option. The downside is, of course, they will come with higher fees and restrictions.
- PNC Bank has something called “Foundation Checking Program,” where consumers are required to take a 90 minute money management class with one of PNC’s non-profit partners. A debit card is then issued which has a $5 monthly fee and a $100 withdrawal limit.
- Chase has “Access Checking,” which costs a whopping $15 per month.
- Wells Fargo has something called “Opportunity Checking,” which costs $10 per month, but that can be waived three ways: 1) maintaining a minimum balance of $2k, or 2) having a direct deposit made each month of $750 or more, and 3) have three or more qualifying linked accounts, such as a debit card, home mortgage, or savings account.
Any one of these options are certainly worth the cost if you’ve been denied a traditional checking account. There are also prepaid credit cards, some of which claim to report to one or more credit reporting agencies. However, I recommend this only if one of the second chance options is not available to you.
Treat bank account bad credit entries using credit report repair.
Some people don’t wish to take part in Second Chance and/or prefer a different approach to removing the bad credit entries with ChexSystems. They may owe money that they don’t have, or may simply have a bone to pick with the bank. If that’s your case, you can approach ChexSystems’ entries the same as any other adverse data found on a credit report, by using credit repair. Challenge the bad credit entries using a credit bureau dispute letter, or negotiate a deal with the creditor-bank using debt relief tactics found in the BestCredit Book.
Since ChexSystems is bound by the FCRA, you are entitled to a free credit report from it once per annum. The following is a list of the other major check reporting agencies and their contact information:
- ChexSystems: www.consumerdebit.com
- Dakota Credit Services: 701.483.9111 (purchased CheckRite)
- First Data: www.firstdata.com (merged with Telecheck)
First Data and ChexSystems are the most widely used checking credit reporting agencies, but it’s a good idea to check with all of them if you suspect anything adverse is being reported. Remember, they are considered bureaus by law, so anything on their reports can be disputed and must be deleted if it cannot be verified within 30 days (or 45 if the report was obtained free).
5. Bankrate, “ChexSystems: ‘Big Brother’ of Banking Is Watching,” www.bankrate.com.