Applying for a checking account If you have a bad credit history is going to be difficult. First of all, so many banks will be wary of accepting your application. If you have bad credit, your chance of getting a bank account is lower than people who have a good credit background. This means you may not be able to apply for loans. Lenders will want proof that you have a bank account.

If you’re not sure whether the way you spent money in the past has pretty much obliterated your chances of getting a bank account, you should check whether you’re listed in a service called Chexsystems or not. This is one way for banks to know if a potential customer is a credit risk.

What is the ChexSystem?

ChexSystem is a network that monitors and lists individuals with bad credit history. Banks and other financial institutions know about this network and use it to check the credit background of new customers. This is a way of preventing individuals and businesses with bad credit history from starting new bank accounts. A system like this prevents bank fraud, which is the term commonly used when people try to game the banking system.

How is the banking system gamed?

Any suspicious activity in the banking system (bouncing checks, closing down bank accounts because of overdrafts, etc) might indicate that you’re trying to do this. Some people may not be aware of it but there is a network that lists people who do this. Most banks have access to this list, and are using it as a screening tool.

If you are listed in Chexsystems, your name stays there for approximately 5 years. Moreover, the marks on your credit account will show in the Chexsystem beside your name. You can check if you’re in Chexsystems. This might be the factor that’s preventing banks from approving your application. The good news is that if you got listed in the Chexsystems and you know you did not do anything to get listed there, you can contact them and provide an explanation for every mark on your record.

Why do you have to go this far to make sure you’re not listed in Chexsystems? This is because you might not be able to get a normal bank account if the banks check if your name is on the list. To prevent any more financial difficulty, make sure you check if your name is on there.

Nowadays, not having access to a banking account is akin to losing an arm and leg. You need a bank account to work, or to accept money from employers. If you have a business, it’s even harder to manage without a bank account. Your employees will need you to pay them through the bank. You also need to take out loans if you want to invest properly, and it’s impossible to do that if you don’t have an account with a good bank.

So what choice do you have? Individuals who have been blacklisted from banks because of credit issues can look for special online accounts that offer banking services to people who may have been listed on Checxsystems. These are called second chance accounts.

But before you go for these, you must know that second chance accounts are expensive accounts. You will pay more fees than you would for an ordinary account. For many people, this may be the only way to get an account set up.