When can I be denied a checking account based on my past banking history?

You may have negative information in your file if you had a checking account before and you:

• Have an unpaid negative balance on that account, such as from an overdraft, that you have not repaid and the account was closed by the bank or credit union (this is called an “involuntary closure”).
• Were suspected of fraud related to a checking account.
• Had a joint account with someone else who had these types of problems.

Banks and credit unions supply this type of negative information to checking account reporting companies, such as Chex Systems and Early Warning Services.  These companies compile and use the information to create reports of an individual’s prior checking account history.  Banks and credit unions may use these reports to help determine whether to offer you a checking account and the type of checking account to offer you. (Retailers may use a similar report to decide if they will accept your checks.

What are my rights?

Accuracy

Checking account reporting companies must comply with the federal Fair Credit Reporting Act (FCRA). This means they must follow reasonable procedures to assure maximum possible accuracy of the information in the reports, and they can’t include most negative information that’s more than seven years old.  In practice, some checking account reporting companies disregard information that is more than five years old.

Know what’s in your report

Nationwide checking account reporting companies must provide consumers with one free annual report per year, upon request.  You have to request the reports individually from each reporting company. We’ve put together a list of some of these checking account reporting companies , along with some information about how you can obtain copies of your reports.

You also have the right to request a free report if you have received an “adverse action” notice. For example, let’s say a bank turns you down for a checking account based on a checking account report. This is an example of an “adverse action”. The bank must provide you with an “adverse action” notice that includes the name and contact information of the checking account reporting agency from which the bank got the report. You can contact the reporting company and request a free copy of the report.

Investigate and correct errors

All checking account reporting companies must investigate consumers’ disputes of inaccurate information on their reports and correct any inaccurate information. Banks and credit unions that report information to checking account reporting companies also have an obligation to investigate and correct disputed information.

Here are some steps you can take if you’ve been denied an account:

Get a copy of your checking account report and review it for any errors

Ask the bank or credit union to provide you with the name of the checking account reporting company that provided the negative information. Contact the company to obtain a free copy of your report and review it for any errors. If you spot any errors, file a dispute.

Check your other credit reports. Some banks and credit unions will use your traditional credit reports, in addition to, or instead of a checking account report, to decide whether to give you a checking account. Get more information about requesting copies of your credit reports.

Find out if the bank or credit union has steps you can take to open an account, or offers lower-risk accounts

If not, consider trying another financial institution. Each bank or credit union has its own policies about the way the information in your checking account report impacts your ability to open an account.  Some banks and credit unions require you to pay any old, unpaid charges and fees before you are allowed to open a new account. Many banks and credit unions offer checking accounts and prepaid cards that are designed to reduce risks for both you and financial institution, by preventing overdraft and overdraft fees.  Because these products are considered less risky, many banks and credit unions may be less reliant on checking account reports when making a decision about a potential customer. As a result, you may be able to qualify for one of these products even if you were denied for another product recently.

For more information, see our consumer guides on choosing and managing checking accounts:

• Consumer guide to selecting a lower risk account
• Consumer guide to managing your checking account
• Consumer guide to being denied a checking account 

You might also consider getting a prepaid card.