If you’ve ever been denied when attempting to open a bank account you know how embarrassing it can be. Don’t become discouraged, there are ways to fight back.
There is nothing more financially crippling than being without a checking account. It’s not only a major inconvenience, but can lead to relying on other expensive options. Before you start screaming at the bank branch manager or call the hotline demanding an answer, it can be helpful to understand why you were denied.
Intro ChexSystems; an organization that records your deposit account experiences (i.e. savings, checking, cds) and acts as a credit report for banks. To date, more than 87 percent of banks, credit unions and other financial institutions in the U.S. rely on ChexSystems, according to the FDIC.
When performing customer screeniFCRA (Fair Credit Reporting Act) banks rely on CheckSystems to find black marks on your record. In most cases red flags include; overdrawn accounts that carry outstanding balances or fees, as well as bounced checks on your report. When you get reported to Chexsystems, the information that is submitted to them remains on your file for at least five years.
Another not so obvious hit can be caused from constant account openings and closing. Banks will pass on customers who are known to switch banks on a consistent basis. Financial institutions see this as a way to lower the risk profile.
Before we discuss the ways to fight back, a rule of thumb when switching accounts is to never close your current account until you have a new one. This way if you are denied a bank account, you still have an account while you fight back.
Ways to Fight Back
Review your report: To understand what is causing you to be denied, visit ChexSystems and request a copy of your report. By law you are allowed a free copy once every 12 months.
Pay what you owe: As you review the report, you will be able to figure out which bank or banks reported you and why. If you legitimately owe the bank money, contact them and ask to work something out. If you reach negotiations you can ask them to remove their ChexSystems report on you. Once an agreement is made between you and the bank, make sure to get it in writing, you never know whom you are speaking with and ChexSystems is known to make contacts for proof.
Fight what you don’t: When there are instances you feel you are the one in the right, contact that bank and plead your case. Just bringing the issue to their attention may be enough for them to realize their mistake and remove the black mark.
If they decline, you will have to be more aggressive and issue a letter-of-dispute to the FCRA (Fair Credit Reporting Act). Your letter should include all the mistakes on your report, with your request for an investigation to correct these errors. Depending on the error, you may need to provide proof. For example; including a receipt that you had paid off an outstanding balance.
It is important to remember ChexSystems is a reporting agency, and therefore have to prove that their record is accurate. They have thirty days to process your request and after investigating your dispute, if nothing can be found, they’re legally obligated to delete the ding.
Second Chance Accounts & Other Options
If you find that the stars are not aligning and you can’t see a bank allowing you to open an account for you anytime soon. It may be time to look at other options.
As I mentioned earlier, over 87 percent of financial intuitions use ChexSystems, which means 13 percent do not. Doing a simple search for “banks without chexsystems” will provide you a number of options. Other options include re-loadable prepaid cards
In your search for a second chance checking account, be sure to run these tests:
- Do your research. Find the bank’s telephone and fax numbers, and street address. Call them and even take the time to visit the bank branch.
- Make sure the bank is FDIC-insured, or if it’s a credit union, NCUSIF insured. This level of insurance guarantees that your money is protected up to $250,000.
- Consider avoiding online banks that are not CheckSystem certified. Having the ability to walk into a bank branch will help ensure the bank is not just a website created to steal your identity.
- Confirm the bank is registered bank a corporation and not a person. If they have a website you can run a WHOIS on the bank’s domain name. This will tell you whom the bank is registered with, if you see that it is a person, you should move on.