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What to do if You're Turned Down for a Checking Account

July 02, 2010

By Barbara Marquand | Money Rates Columnist

Trouble may be afoot if a bank turns you down for a checking account. Here are four steps to take if this happens to you.

1. Checking Account Rejection: Find Out Why

Banks and credit unions offer free and rewards checking to get customers in the door, but they also lose billions every year from people who repeatedly bounce checks or abandon overdrawn accounts. To lower their risk, financial institutions report customers who mishandle checking and savings accounts to a consumer-reporting agency called ChexSystems. Then they consult the agency whenever someone applies for a new account. If the bank finds you have a bad record, then it might decide to reject your application.

See if you can get an answer from the bank about why you were turned down, and then go to the ChexSystems website to request a copy of your report. If the bank or credit union based its decision on ChexSystems, such a report may help you understand what happened. In fact, you're entitled to one free copy of your report every year.

2. Dispute Inaccurate Checking Account Information

There's nothing you can do to delete accurate information, which stays on your report for five years. The reporting bank must report if you paid or settled an account, but even then it's under no obligation to remove the original report within that timeframe, ChexSystems says.

But you can dispute mistakes or ask to add notes to explain circumstances.

To dispute errors, download a "customer request for reinvestigation" on the ChexSystems website, fill it out, and mail it to the agency. ChexSystems then reinvestigates the information, contacting the financial institution if necessary, and gets back to you, usually within 30 days. Any mistakes are corrected immediately.

To obtain an explanation about a report, download and fill out a "request for consumer statement form." Keep it brief--no more than 100 words--and don't mention any other individuals or businesses.

3. Fight Identity Fraud

If you think someone has compromised your existing accounts or opened fraudulent checking accounts in your name, then file a police report and ask that a security alert be placed on your ChexSystems file. Immediately get free report copies from the credit reporting bureaus (for example, from AnnualCreditReport.com) to see whether any fraudulent credit accounts have been opened in your name. Then contact the relevant financial institutions to close any compromised accounts, and file a complaint with the Federal Trade Commission.

4. Bad Checking Account Record? Consider a Second Chance Account

If you've cleared up any account history errors, but still don't qualify for a free checking account because of real mistakes you've made in the past, look for a bank that offers "second-chance checking accounts." These accounts are designed for people with a spotty history. If that fails, you may need to seek a banking institution that is not a member of ChexSystems. Meanwhile, be sure to seek outside money management help to prevent falling into the same mistakes again.

As you work your way out of the problem, bear in mind that ChexSystems only maintains records; it has no decision-making power in whether you get a checking or savings account. Be polite and professional in dealing with their staff--and see if you can learn something about how to better manage your accounts in the process.

 

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