Bank accounts have almost become a necessity, and they provide a convenient way to pay bills, cash checks and save for the future. If you've struggled with financial issues in the past, however, it may be challenging to find a bank that will open an account for you. You can start to get your financial life back on track by discovering the reasons your account application was denied. That will enable you to address each issue.
Reasons for Denial
When you visit a bank to open a checking or savings account, you must complete an application. The bank reviews this application to determine whether it is willing to open an account to allow you to use checks or a debit card and keep your money at that bank. The bank makes this decision based on your financial history as well as a number of other factors.
According to the Federal Deposit Insurance Corporation (FDIC), negative account screening is the most common reason bank accounts are denied, followed by insufficient identification and poor credit history. Negative account screening is a result of having negative items in your banking history. This may include things such as a history of bounced checks or an unsatisfied overdraft. This differs from credit history, which is based on the information found on your credit reports and includes unpaid debts or poor repayment history.
Bank History Reporting
More than 87 percent of banks in the U.S. rely on a bank account screening report provided by ChexSystems Inc., according to the FDIC. ChexSystems is a group of independent banking organizations that maintain banking histories on individuals and businesses. As the bank reviews your account, it generates a ChexSystems report to examine your bank history. This report is similar to a credit report, but covers only your banking information, not other types of accounts. According to Bankrate, negative items on your ChexSystems report will stay on the report for up to five years.
What To Do
If you've been denied a bank account, there are several steps you can take to get your financial situation back on track. If a negative account screening caused the denial, contact ChexSystems to request a free copy of your report. Review the items on the report and dispute any that appear to be in error. For unsatisfied accounts, contact the bank associated with these accounts and attempt to resolve any debts. Some banks may remove negative information if you pay off overdrafts or other money owed. You also should obtain a copy of your credit reports from the three credit bureaus -- Equifax, Experian and TransUnion. You can request a free copy of your credit reports once each year through AnnualCreditReport.com. Review your credit report for negative items that may have caused your account to be denied, and work with creditors to resolve these issues.
As you work to re-establish good credit, consider a second-chance, or alternative, bank account. According to the FDIC, nearly one-fourth of U.S. banks offer these special accounts for people with troubled financial histories. Many come with limitations, such as a limited number of checks, or may offer financial counseling programs to help you avoid future banking troubles.