Because of the reality that most people who have a bad credit history are desperate for a new start, predatory lending exists in the mortgage industry. What is this exactly? This term is used to describe the actions of brokers that involve adding unnecessary fees to a bad credit application. In almost all cases, the mortgage broker gets away with this because he knows that the customer is desperate.
The individuals who most prone to predatory actions of some brokers and creditors are the ones who may have been listed on ChexSystems.
ChexSystems is a database where customer information is stored. Financial institutions (mainly banks) pool their reports on bad customers and these customers end up on the list. Chexsystems regularly provides information about account holders that mismanage their bank accounts. These individuals are subsequently blacklisted from banks, and thus cannot open new checking accounts. If you bounce a check and procrastinate your payments, you could end up in the ChexSystems database of credit risks. Even receiving a bogus check will make the banks suspect you, and therefore report your activities to the network.
This type of financial felony could make life hard for you for five years, which is the amount of time your name will be listed on Chexsystems. During this time, you might find it impossible to open a new checking account.
Some people think that paying off the debt will solve everything, but a lot of consumers will tell you that this isn’t always the case. Even if you pay off the offending debt, your name might still be listed on ChexSystems.
If you’re in this predicament right now, there are some things you can do. First, you can try to request for re-evaluation. Second, you can try looking for a bank that offers second chances to people who are listed on ChexSystems. These banks are often called non-chexsystems banks because they don’t check whether or not you’re on Chexsystems before they process your application.
But beware, some banks are not FDIC insured or are actually scams that are trying to exploit desperate individuals. Make sure the bank is FDIC insured. FDIC is the system that protects you against the loss of your deposits. If the bank is under FDIC regulations, you are fairly safe.
Opening a bank account with an institution that isn’t FDIC insured could lead to further loss of assets and money. If that institution goes out of business, you will no longer be able to get back your money in part or in full. If the institution offering the second chance bank accounts is a credit union, make sure it’s NCUSIF insured. NCUSIF insurance is similar to FDIC insurance, except it’s for credit unions.
Also, check if the institution is physically accessible. There are hundreds of banks online right now, and these may allow online interaction with customers. However, it’s best to make sure that the institution has a land-based branch. Don’t just trust the online version of the bank you want to open an account with. Banks with land-based branches are legitimate financial institutions.
Here’s a final reminder, make sure the bank does not require you to use direct deposit to open an account. Make sure the institution doesn’t ask you to pay for monthly statements and withdrawals. The options that are normally provided for free by regular banks and credit unions should also be available in the bank you want to open an account with.