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Banking Basics

Have Bad Credit? How To Open A Free Checking Account with No Credit Check and No Deposit

If you have bad credit, opening a new bank account may be difficult. Learn more about second chance banking opportunities and what banks look at when they evaluate your banking and credit history.

Kayla Sloan • January 22, 2021

Having a bank account is a necessity in life. But, if you have marginal credit or a limited credit history, it may be difficult to open a new bank account. Some traditional banks might turn you down for a checking account if you have bad credit due to unpaid overdraft fees, missed or late credit payments, and account closures. 

But this shouldn’t discourage you. You can still open a bank account with bad credit. Whether you’re worried about your approval odds or you’ve been denied by your local bank, there are second chance banking opportunities for people with bad credit or poor banking history.

The first step to improving your banking opportunities is to understand what banks look for when they evaluate your credit and bank history.

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In This Article

  1. How Do Banks Determine ‘Bad’ Credit?
  2. What Are Second Chance Bank Accounts?
  3. Second Chance Banking Options
  4. Second Chance Banking Option through Chime
  5. Checking Accounts for Bad Credit
  6. How to Fix Your Past Banking Mistakes

How Do Banks Determine ‘Bad’ Credit?

Similar to credit card companies, banks look at the credit history of potential customers before granting them access to financial products and services, which include checking and savings accounts.

📊 Traditional banks could conduct a soft or hard credit inquiry when you open an account

When you open a checking or savings account, most banks do a soft inquiry on your credit report. A soft inquiry does not affect your credit score, and typically occurs when you or someone you authorize checks your credit report. Some examples of soft inquiries are self credit checks, a creditor checking your credit for a preapproval, or an employment background check. 

But keep in mind that some banks could do a hard pull (also known as  “hard inquiry” or “hard credit check”)  on your credit report, to identify the level of risk associated with your prior banking history. A hard credit pull typically occurs when a lender or credit card issuer checks your credit when making a lending decision and is reported to the three major credit bureaus (e.g., Equifax, Experian, and TransUnion), which can slightly decrease your credit score in the short term. In lieu of checking your credit score, some banks might instead run a ChexSystems report.

📄 Banks may use a ChexSystems Report to look at your banking history

Banks also work with other agencies to dig deeper into your banking behavior. One of the agencies they may turn to for this is ChexSystems, which uses your social security number to look up your financial history. ChexSystems can see bad checks, overdrafts, and account freezes that may have negatively affected your financial history. The company then reports this information to banks. In addition, banks review for unpaid negative balances on checking or savings accounts, excessive withdrawals, and check fraud. If any of these behaviors are present, the bank may reject your application for an account.

If this happens, you have a few options. First, you can try to fix the issues. A second option is to ask the bank to reconsider your account application. Lastly, you can try to find a bank that won’t check your past banking history.

What Are Second Chance Bank Accounts?

It can be challenging to rebuild your finances when you have bad credit or poor banking history. There are banks and non-bank fintech companies that offer second chance banking, which provides checking accounts that can help you rebuild your banking history.

Second chance checking accounts work like regular bank accounts but may have fewer services and certain limitations. They usually have monthly fees that can’t be waived, and they often carry more requirements than standard checking accounts, such as setting up regular direct deposits and requiring higher minimum balances. They typically won’t allow you to write checks or enroll in an overdraft program. It’s also important to note that these checking accounts can help improve banking history, but they don’t rebuild credit. For that, consider a secured credit card.

Second Chance Banking Options

Many large U.S. banks allow individuals to open second chance bank accounts if they have a negative banking history. That said, many of them have a number of bank fees that are important to fully understand and evaluate when considering your options. Depending on the second chance option, checking account fees, mobile banking apps and ATM networks will differ. It’s worth weighing all your options before choosing the right second chance checking account for you. The best second chance accounts come with:

  • Low or no monthly fees
  • No minimum balance requirements
  • Services such as debit card access, online bill pay and unlimited check writing privileges
  • Few limits, such as daily or monthly maximum transaction amounts

Below is a summary of the fees, requirements, and features of some second chance banking options.

Wells Fargo Clear Access Banking 

  • $25 minimum deposit to open account
  • $5 monthly service fee (waived for account holders aged 13 to 24)
  • No overdraft or non-sufficient funds (NSF) fees
  • Lower account balance requirements
  • Checkless checking
  • Mobile banking access through the Wells Fargo mobile banking app
  • Debit card for making purchases, paying bills or withdrawing cash
  • Access to approximately 12,000 Wells Fargo ATMs
  • 24/7 customer service and fraud monitoring

LendingClub Essential Checking

  • $10 minimum balance to open
  • $9 monthly service fee
  • Must enroll in online banking, eStatements and receive a debit card to qualify for this account
  • Debit card ($500 daily limit on purchases and ATM withdrawals)
  • Mobile check deposit ($1,000 daily limit; $2,000 limit per 10 days)
  • LendingClub mobile app access and mobile wallet integration
  • Direct deposit
  • Ability to upgrade account to Rewards Checking after 12 months of responsible banking

Green Dot Bank GO2 Bank Account 

  • No minimum balance required to open an account
  • No monthly fees with eligible direct deposit; otherwise, $5 per month
  • Overdraft protection of up to $200
  • Get paid up to two days early with direct deposit
  • Free Samsung Galaxy smartphone with qualifying direct deposit
  • Free nationwide ATM network
  • Debit card
  • Mobile banking
  • Earn cash back on eligible gift card purchases
  • Deposit cash at participating retail store locations

Second Chance Banking Option through Chime

Chime Second Chance Banking

  • No minimum balance requirements 
  • No monthly maintenance fees
  • No overdraft fees¹
  • Access to +60,000 fee-free ATMs²
  • No foreign transaction fees
  • Get paid up to 2 days early with direct deposit³
  • Grow savings automatically5,6
  • No ChexSystems review or credit check
  • Award-winning mobile app

Checking Accounts for Bad Credit

Now that you are familiar with second chance banking, it’s important you know what to look for when attempting to open a bank account with poor credit. Consider the following:

Look for banking options that don’t conduct credit checks

Not all banks run a credit check or even need a deposit to open an account. In fact, there are excellent options for accessing accounts, including traditional banks, online banks and non-bank fintech companies. These options do not rely on consumer reporting agencies like ChexSystems. Chime, for example, does not run credit checks or use ChexSystems as part of their decision-making process for enrolling new members.

Open an online bank account with no deposit

Most traditional banks require an opening deposit before you can acquire a new checking account. These deposits can range from $25 up to $2,500. But even a modest deposit amount can be a burden for some people. Fortunately, there are options for those who cannot afford a deposit or for those who want to avoid paying a fee to open a bank account. The good news is that you can open an online bank account with no deposit. For example, Chime offers access to online checking accounts with no deposit required.

Choose a banking option with no fees

You won’t have to worry about fees piling up and worsening your credit score if you choose a second chance banking option with little to no fees. For example, Chime accounts have no monthly fees, no minimum balances, and no overdraft¹ or foreign transaction fees. And you can even get your paycheck up to 2 days early with direct deposit.³

How to Fix Your Past Banking Mistakes

If you’re rejected for a new bank account, it may be worthwhile to try to fix your past banking mistakes. This, in turn, will help you repair your financial history.

Step 1: Review your ChexSystems Report

To start, you can order your ChexSystems report. ChexSystems is a consumer reporting agency (CRA) that collects data about how you’ve used your past bank accounts. Your ChexSystems report will be particularly helpful if your ideal bank uses this CRA to evaluate account applications. But, even if the bank in question doesn’t use ChexSystems, this report can help you repair your financial history as you’ll be able to see the issues that you need to correct.

For example, if you have negative account balances, like a loan that hasn’t been paid in full or a former overdrafted bank account, you can call the banks listed to find out if you can still pay them back. If they will allow you to do this, you can then ask if they will remove their negative reports.

If you can’t get your past mistakes corrected and removed from your ChexSystems report, keep track of the dates when the bad banking occurred. Most negative marks drop off reports after seven years. So, if you are close to the seven-year mark, the issues may resolve themselves.

Something else to be aware of: just like a credit report, a banking history report can have errors. So, make sure you look at your report completely to ensure it is accurate. If not, contact ChexSystems and start a dispute over the mistakes on your report.

Step 2: Pay off lingering debts

Having missed or late payments can drastically affect your credit score. That’s why it’s so important that you pay your bills on time and in full each month, and try to keep your balances low. You should also pay attention to your credit utilization, or how much you charge on your credit card. It’s typically recommended that you keep balances below 30 percent of your credit limit; sticking to this 30 percent credit utilization figure can really help your credit score. 

There are multiple tactics to help you methodically pay off money you owe. The two most popular debt repayment strategies are the avalanche debt repayment method and the snowball debt repayment method. Both of these methods work best when you utilize an automatic savings account to ensure you don’t spend the money you need to pay off your debt.

Banking through Chime, you can automatically deposit money into your savings5. Chime members can automatically transfer a percentage of every paycheck6 into their savings account to achieve their financial goals faster. It’s a hassle-free way to add to your savings and help you make a dent in your debt.

Step 3: Build your credit 

With second chance banking, opening a bank account with bad credit is possible, but the best way to ensure sustainable financial health is to build your credit. There are several steps you can take to build your credit score. The important thing to remember is building good credit takes time, but if you put in the work, you’ll gradually start to see improvements in your credit score.

One great way to build your credit is by using the Secured Chime Credit Builder VisaⓇ Credit Card. Each month, Chime reports payments to the major credit bureaus so, with regular, on-time payments, everyday purchases like gas, groceries, bills, and subscriptions can all help you build your credit score.⁴

There are no annual fees, no interest, no credit checks, and no minimum security deposits. However, to be eligible to apply, you must have received $200 or more in a qualifying direct deposit to your Chime Spending Account in the last 365 days.7

Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC. Credit Builder card issued by Stride Bank, N.A.

While Chime doesn’t issue personal checkbooks to write checks, Chime Checkbook gives you the freedom to send checks to anyone, anytime, from anywhere. See your issuing bank’s Deposit Account Agreement for full Chime Checkbook details.

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Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank and Stride Bank N.A. (“Banks”). Banks are not responsible for the accuracy of any content provided by author(s) or contributor(s).

1 Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each month. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member's Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime's discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won't cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.

2 Out-of-network ATM withdrawal fees apply except at MoneyPass ATMs in a 7-Eleven location or any Allpoint or Visa Plus Alliance ATM. Other fees such as third-party and cash deposit fees may apply.

3 Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

4 Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

5 Chime Checking Account is required to be eligible for a Savings Account.

6 Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your Savings Account.

7 To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

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