If you’re thinking about opening a checking account, you may worry that your credit score isn’t high enough to get one. If you had some mishaps on your credit report, you may think you’re out of luck.
But do banks do a credit check when you open a checking account?
Typically they don’t, but some banks do check other things that could affect your eligibility for a checking account. Some banks do check your credit score too.
Here’s what you must know in order to open a checking account with ease.
What do banks consider when you open a checking account?
Every bank is different. Most banks and credit unions do not perform a credit inquiry when you apply for a new bank account. Even though you aren’t borrowing money when you open a checking account, you still use the bank’s services. Banks are for-profit, so they want to deal only with clients who will make them a profit.
Financial institutions need assurance that account holders will handle their accounts responsibly. If you’ve struggled to manage debt obligations in the past, there’s a greater chance that you’ll have trouble staying on top of your checking account.
This means that they only want clients who will use their accounts responsibly, not overdraft or abuse their accounts.
That being said, some banks check only ChexSystems and others check both ChexSystems and your credit score or at least your credit report.
If banks do check your credit report, they’re looking for financial responsibility. They don’t want to see late payments, overextended credit lines, or collection accounts.
What is ChexSystems?
You’re most likely familiar with the credit bureaus – TransUnion, Experian, and Equifax. They report information about your credit and not your banking. Any credit cards, personal loans, mortgages, or student loans you have or had are reported on a credit report.
ChexSystems is the banking version of the credit report. Instead of providing credit scores and details on your previous borrowing history, ChexSystems is what’s referred to as a check screening agency. It provides records of individual customers’ closed checking and savings account histories.
It reports anything you’ve done wrong with a bank account. It shows any unpaid negative balances (from overdrafting), frequent overdraft fees, bounced checks, and suspected fraud.
If you’ve always handled your bank accounts appropriately, you won’t have a ChexSystems report, and that’s a good thing.
If you have a ChexSystems report, it’s because a bank reported you for one of the following:
- Bounced checks
- Account abuse
- Fraudulent activity
- Non-active accounts (forced account closure)
It’s worse to be in ChexSystems than having a low credit score, when you’re trying to open a bank account.
Do banks pull your credit report before opening an account?
Most banks only pull your ChexSystems or Early Warning Services report. It’s pretty rare for a bank to pull your credit reports from the three major credit bureaus to open a checking account.
Before you apply for a checking account, you can ask the bank or check their website. Most are transparent with what they require for you to open a bank account. If you come across a bank that checks your credit and you don’t think you’ll qualify, there are many other banks to choose from.
See also: Banks That Don’t Use ChexSystems
Can you open a bank account with a poor credit score?
If a bank checks credit, your chances of opening a bank account with a poor credit score are slim. If you have a poor credit score, chances are you have marks on the ChexSystems platform too.
Every ‘issue’ has a different point value. The higher your ChexSystems score is, the less risk you pose to a bank. If you have a low ChexSystems score, you may also have a low credit score. This is especially true if you’ve had unpaid fees or overdrafts sent to a collection agency, affecting both your consumer credit score and ChexSystems score.
Can banks check your credit score?
Banks can check your credit score but only with your approval. You must sign a disclosure that allows them to pull your credit. When they pull your credit, it could be a ‘hard inquiry.’ This means it affects your credit score.
While hard inquiries aren’t worth many points, they could take off five to ten points from your score. If your credit score is already borderline, this could put you over the edge, making you ineligible for a new bank account or loan.
Can you hide your credit score?
If a bank asks to pull your credit and you authorize it, you can’t hide your credit score. However, if you put a freeze on your credit, no one can pull your credit, including you. This will ‘hide’ your credit score from banks.
If a bank cares that much about your credit score, they may ask you to unfreeze it, but most won’t. In fact, most banks won’t ask about your credit score unless they have a reason to worry about your financial worthiness.
Your credit score most likely won’t affect your approval odds for a new checking account, however, it does provide an overall picture of your financial health.
In addition to pulling your ChexSystems report, make sure you check your credit report provided by the three credit bureaus at AnnualCreditReport.com. You should stay on top of your credit history regardless of whether it’s used to open a checking account.