Katie Stiner

Banks and credit unions may deny a checking account after screening recent and past financial actions – looking at overall banking history.

Banks use this information to evaluate your eligibility for a checking account.

Here are common reasons why a bank might deny opening a checking account.

1. Negative ChexSystems record

ChexSystems is a reporting agency that monitors consumer banking activity. When you apply for a checking account, the bank or credit union accesses information about you from ChexSystems. They then decide whether to approve or reject your application.

Not everyone has a ChexSystems record; you only have it when you show signs of financial instability. Previous poor account management includes unverified identity, low credit score, fraud, unpaid past fees and charges.

These habits lower ChexSystems consumer score, and a low score will increase the chances of being denied a checking account.

With a ChexSystems record, you have to take precautions when trying to open a checking account. In that case, review and rectify the issues indicated on your ChexSystems record, for example, by paying your previous overdraft fees.

With a record, you can also open a second chance checking account specifically meant for individuals with a ChexSystems record. These accounts usually have fewer features and charge more fees.

Some banks allow you to graduate to a regular account if you show consistent and responsible banking activity with your second chance checking record.

» See your options, find the best second chance checking accounts

2. Errors on ChexSystems report

You can be denied a checking account even though your past financial record looks good. A possible reason for this is when a bank relies on a flawed ChexSystems report that does not reflect your actual history.

Errors on your record can result from the wrong identity because of incorrect personal details, such as an incorrect social security number (SSN), put in your ChexSystems record.

That’s why it’s critical to check if you have a ChexSystems record. If you do, thoroughly examine every detail to determine that they are correct.

Suppose you identify mistakes in your ChexSystems record, submit a dispute of the information to ChexSystems and the bank.

3. Unverified identity

If you have recently changed your personal identification information, make sure it is updated on ChexSystems. Otherwise, the bank or Credit union will not verify your identity and deny you a checking account.

Failure to provide enough identification documents will result in the bank’s inability to verify your identity.

Most banks require two forms of identification documents: a social security card, driver’s license, state ID, passport, or birth certificate.

Frequently check and your file on ChexSystems to see that it is up to date.

When applying for a new checking account, make sure to present all necessary identification documents.

4. Too many overdrafts

A high number of overdrafts can indicate financial instability and poor management of funds.

When banks notice a history of frequent overdraws on your account, they are more likely hesitant to create an account.

5. Too many bounced checks

Checks bounce when you do not have sufficient funds in your checking account to cover the payment written against it.

Several databases, including ChexSystems, keep track of bounced checks.

When your file has a history of a substantial number of bounced checks, banks and credit unions will deny you a new account.

6. Suspected fraud or identity theft

A background of fraudulent activity, including intentionally writing bad checks and trying to steal someone else’s identity, may prevent opening a new account.

Whenever there is fraud associated with one of the bank accounts, look into clearing it before applying for another account.

If the fraudulent activity was mistakenly put into the account, file a dispute with the bank and have them clear out the error.

7. Owing money to other accounts

Banks and Credit Unions may read negative amounts on accountsm which will imply that financial irresponsibility.

They will deny a checking account because they suspect that irresponsible behavior will continue.

Before opening a checking account, look through other accounts to see if there is an outstanding balance.

Clear any unpaid balances before submitting an application for a new checking account.

8. Account abuse

Account abuse occurs when failing to follow the bank’s regulations and protocol while using the account.

Whether currently or in the past, account abuse will make the bank unlikely to approve your application for a new account.

Adhere to the institution’s rules and check with a representative when something is not clear.

9. Too many accounts applied for

Sending in too many new account applications within a short time may look suspicious and financial institutions may deny a new checking account.

Unless there is a good reason, avoid applying for many accounts within a short time frame.

Final thoughts

As you plan to open a new checking account, look through each of the above items to make sure there isn’t one that will lower your application’s chances of approval.

When your checking account is opened, it is critical to maintaining a good banking history.

Financial actions and history will appear in your ChexSystems report and may cause issues in the future.

Maintain good banking habits to avoid being denied a checking account.

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