In general, it is possible to open a bank account even if you owe money to another bank. However, whether or not you will be approved for an account may depend on the specific circumstances of your situation and the policies of the bank you are trying to open an account with.
Paying off your bank debt is an important step, as many banks will not even let you open a savings account until you have cleared up your ChexSystems report.
A negative or overdrawn bank account is not a criminal offense. However, your account could be sent to collections, and unpaid balances will show up on your checking account report, which could make it difficult to open an account in the future.
Money you owe to your bank is a non-priority debt, which means that you might not lose your home for not paying the debts, but you can still be taken to court and ordered to pay what you owe - often with extra costs on top. If you owe your bank money and cannot pay: get advice.
Debt forgiveness happens when a lender forgives either all or some of a borrower's outstanding balance on their loan or credit account. For a creditor to erase a portion of the debt or the entirety of debt owed, typically the borrower must qualify for a special program.
While paying back the debts you owe is super important, sometimes circumstances make it difficult. But do debts ever really expire? The completely accurate answer is: No, they don't.
If you've had banking problems, ChexSystems will alert other banks about them for up to five years. Opening new accounts could be tough. Prepaid cards or second-chance checking could help. Spencer Tierney is a consumer banking writer at NerdWallet.
Reasons You Can Be Denied a Checking Account
Excessive overdrafts or nonsufficient funds incidents. Unpaid fees or negative account balances, whether from an active or closed account. Suspected fraud or identity theft. Applying for too many bank accounts over a short period of time.
Your overdraft will need to be agreed with your new bank or building society for it to be switched. Or they might be able to offer you a way of helping you pay off your overdraft instead. If this isn't possible, you'll need to repay your current overdraft before you switch.
Bottom Line. The primary reasons people can't open a bank account are negative items on a ChexSystems or Early Warning Services report, errors on the reports or bad credit.
Look for Second-Chance Accounts
If you can't get approved, you may not be out of luck. Many banks offer second-chance accounts for people who can't open a regular account. These accounts often have more restrictions and higher costs, but are usually more affordable than using check cashing or money order services.
When a bank closes your account with a negative balance, you will be responsible for paying the amount owed. If you do not pay the amount in a timely manner, the bank may send your account to a collections agency and report your debt to credit bureaus, which could lower your credit score.
Overdrawn Account
You'll need to get your account to a zero balance or higher before the bank will process your closure request.
There is nothing to stop you having more than one bank account. Potentially, you can have as many bank accounts as you choose. However, there are pros and cons to weigh up when it comes to spreading your money across several accounts with a variety of banks.
What Information Do You Need to Open a Bank Account? Banks and credit unions want to know their new customers can manage their checking and savings accounts responsibly. However, they won't check your credit report or score, so you won't need an established credit history to qualify for a bank account.
A bank account freeze means you can't take or transfer money out of the account. Bank accounts are typically frozen for suspected illegal activity, a creditor seeking payment, or by government request. A frozen account may also be a sign that you've been a victim of identity theft.
Second chance bank accounts provide consumers who have been denied a checking account with access to basic banking services. However, some important features may be missing, and you may need to pay a monthly fee that isn't waivable, so shop around and compare options before you apply.
Pay Off Outstanding Debts and Fees
If information on your report was accurate, you still may be able to improve your chances of opening an account. You will probably want to show that you are trying to rectify past problems. Check with the bank that declined your recent application for an account.
The information about the blacklisting can be found in your credit profile as held by the Major Credit Bureaus :- Transunion Credit Bureau ; Experian Credit Bureau; Compuscan Credit Bureau and Xds Credit Bureau.
To be “blacklisted” by ChexSystems effectively means that you have a very poor ChexSystems score. Due to a history of overdrafts, bounced checks, etc., your score is low enough that any bank considering you for a standard checking account will deny you based on your risk profile.
A credit reporting company generally can report most negative information for seven years. Information about a lawsuit or a judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. Bankruptcies can stay on your report for up to ten years.
If a creditor hasn't contacted you about a credit debt within the 6 year time limit they can't force you to pay it back.
Six Year Limitation Period
For most debts, a creditor must begin court action to recover the debt within six years of the date you: Last made a payment. Admitted in writing that you owe the money.