What a second chance checking account is
A second chance checking account is designed for people who have had banking trouble before, such as a closed account, unpaid overdrafts, or a history that shows up on a checking account consumer report. According to the Federal Deposit Insurance Corporation, some banks offer these accounts specifically to help people who could not open a regular checking account start over and rebuild a banking history. These accounts usually work like a standard checking account, with a debit card and online access, but they may come with fewer features than a full checking account until you build a positive history with the bank.
What banks check when you ask to open an account
When you ask a bank to open a checking account, the bank may review a checking account consumer report rather than your credit report. According to the Consumer Financial Protection Bureau, this report can include items like unpaid overdrafts, returned checks, and closed accounts, and a bank can turn down your request based on what it finds. The companies that produce these reports must comply with the Fair Credit Reporting Act. If you find an error, you have the right to dispute it, and the reporting company must reasonably investigate your dispute. Before you ask a bank to open an account, it can help to request a copy of your checking account consumer report so you know what the bank will see and can correct any mistakes first.
Bank On accounts
Some second chance accounts meet the Bank On account standards, which call for low and transparent costs and do not allow overdraft or insufficient fund fees. That means you cannot be charged for spending more than what is in the account, since the transaction is simply declined instead. This structure removes one of the biggest costs that pushes people out of the banking system in the first place. If you are choosing between second chance accounts, ask the bank whether its account meets these standards, since not every second chance account does.
Rebuilding your banking history and next steps
A second chance checking account can be a first step back into everyday banking. Using the account responsibly, keeping a positive balance, and avoiding the kind of activity that shows up on a checking account consumer report can help your history look better the next time you ask a bank to open an account or seek a loan. If a checking account consumer report holds an error, dispute it directly with the reporting company rather than assuming it will resolve on its own. The related guides listed below go further on reading your credit report, repairing bad credit, and personal loans and credit cards if you are also working on your credit history.
Key facts
- Consumer report screeningA bank may turn down a checking account applicant based on a checking account consumer report; the reporting companies must comply with the Fair Credit Reporting Act and reasonably investigate disputes of inaccurate information.[1]
- Second chance accountSome banks offer second chance banking designed for people who have had banking problems before, and these accounts can help rebuild a banking history.[2]
- Second chance account overdraftCertified Bank On accounts have low and transparent costs and do not allow overdraft or insufficient fund fees.[2]
Common questions
Will a second chance checking account hurt my credit score
A second chance checking account is not a loan, so opening one typically does not involve your credit report the way a loan or credit card request does. Banks instead look at a separate checking account consumer report, which reflects banking activity rather than credit accounts.
Can I dispute an error on my checking account consumer report
Yes. The Consumer Financial Protection Bureau explains that you can dispute inaccurate information on a checking account consumer report directly with the company that produced it, and that company must reasonably investigate your dispute under the Fair Credit Reporting Act.
Do all second chance checking accounts skip overdraft fees
No. Only accounts that meet the Bank On account standards are required to skip overdraft and insufficient fund fees. Other second chance accounts may still charge fees, so ask the bank directly what its account allows before you open one.
How long do items stay on a checking account consumer report
The facts available here do not state a specific time limit for how long items remain on a checking account consumer report. Ask the reporting company directly, or check with the Consumer Financial Protection Bureau for current guidance.
Sources
- Consumer Financial Protection Bureau. How do I dispute an error on my checking account consumer report?.
- Federal Deposit Insurance Corporation. Get Banked.