Are you having trouble opening a new checking or savings account? It may be because a little known financial score called a banking score is hurting your chances of starting an account.
Many of us are familiar with credit scores. And you may even know the steps to take to monitor and improve your credit. But you may be less acquainted with the idea of a banking score, how to find it, or how to fix any errors that could be causing problems.
In this article, we explain what a banking score is and how you can check your score today. You’ll also learn how to remove any mistakes on your banking score so that you can open a checking account ASAP.
What Is A Banking Score?
A banking score is a consumer score created by ChexSystems that ranks how well you handle checking accounts. The score ranges from 100 to 899 with a higher score indicating that you are a lower-risk customer.
Your ChexSystems report will include things like:
- Number of bounced checks
- Number of account closures
- Number of inquiries financial institutions have made about you
- How many check orders you’ve placed
If you have a history of bouncing checks or having accounts closed due to unpaid fees, you may have a low banking score. Here are the steps you can take to improve it.
Request A Free ChexSystems Report
As previously mentioned, ChexSystems is the company that records your banking history. Much like Equifax, Experian and TransUnion track your credit history, ChexSystems tracks your history with checking and savings accounts.
You are entitled to one free ChexSystems report every twelve months. You can also request a free ChexSystems Consumer Score.
You can request a free ChexSystems report online. But to get the score, you’ll need to mail the Score Request form to:
Chex Systems, Inc.
Attn: Consumer Relations
7805 Hudson Road, Suite 100
Woodbury, MN 55125
Ask Your Bank To Waive Overdue Fees
Once you receive your report and your banking score, you’ll be able to see what factors are making it difficult for you to open a bank account. Unpaid bank fees, bounced checks, payday loans, and any unpaid debts in collections could be dragging down your banking score.
Unfortunately, overdraft fees and bounced checks can leave many people in a vicious cycle. Rather than deal with fee after fee, ask your bank to waive them. Many banks will waive unpaid fees if you specifically ask a customer service representative to forgive the fees.
Getting the fees waived won’t fix your banking score, but it can help you break the overdraft fee cycle. This tactic works best when you have a current banking relationship.
Ask Financial Institutions To Remove Information From Your ChexSystems Report
If you don’t currently have a checking account, you may want to ask former financial institutions to remove negative information from your ChexSystems report. This may involve a negotiation where you pay old fees in exchange for the bank removing the information from your Chex report.
It’s important to understand that your former bank or credit union is not obligated to remove legitimate negative marks. They may refuse your request, but it can’t hurt to pick up the phone to ask.
Dispute Errors
If you found any errors in your ChexSystems report, you have the right to dispute it. It’s easy to dispute the errors online.
For most people, the easiest method for disputing errors will be to circle or highlight the errors directly on the report that ChexSystems sent to you. You can take a picture of the error, and upload it along with any supporting documentation to the ChexSystems dispute report link.
In addition to uploading the files, provide as much detail as possible when you fill out the online dispute form. ChexSystems has created a video tutorial that gives more details about how to submit a dispute.
If you’re still confused, call ChexSystems customer service at 800.513.7125 to get more information.
Refine Your Banking Habits
If you have a checking account, but your bank has threatened closure, you may need to refine your checking habits. Here are a few good banking practices to follow.
Apply For A Second-Chance Checking Account
Once you’ve worked through old issues, and disputed errors, it’s time to work on moving your financial life forward. That means opening up a new checking account. Since a checking account is the centerpiece of your financial life, you want to get the best possible account. Look for accounts with low monthly fees, and minimal (or no) overdraft fees.
Local credit unions may offer accounts if you qualify for membership. Ideally, you should be in a place where you can open a second-chance checking account. These accounts are specifically geared towards people who have struggled with account closures in the past. Here are some of the best places to open second-chance checking accounts.
Consider Opening A Prepaid Debit Card
When you can’t open a bank account, opening a prepaid debit card may be one of your next-best options. Many of these cards (such as the Walmart MoneyCard) will allow you to accept direct deposit (from your employer), and even deposit personal checks.
With these types of cards, you’ll almost always pay a reload fee or a deposit fee. But these are lower than the fees you'd typically pay at a check cashing store. Opening a prepaid debit card won’t help you fix your banking score. But it will help ease some of the issues that many underbanked consumers face.
Know Your Credit Score
It's important to note that some banks also rely on your credit score when deciding on whether to let you open an account. So, beyond your banking score, you should also know your credit score and work to improve that as well.
Check out our full guide on How To Raise Your Credit Score.
Final Thoughts
Over time, the negative impact of bounced checks and account closures eases, and your consumer banking score should improve. If you don’t qualify for a checking account today, try again in six months or a year.
Soon should you have the opportunity to open a second-chance checking account. And if you continue to follow good banking habits, you’ll eventually be able to open an account with one of the banks from our list of the best free checking accounts of 2020.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.