| October 16, 2014

Can Your Credit Score Keep You from Opening a Bank Account?

CFPB evaluates how banks use credit to blacklist customers

Bad credit could make you unbankable

Most people know that a bad credit score can prevent a consumer from qualifying for loans and credit cards, but did you know that it can also keep you from opening a bank account?

The Consumer Financial Protection Bureau (CFPB) has raised concerns about policies that banks use to review potential customers who apply for new account. Complaints have been made that negative information on a consumer’s credit report can prevent consumers from qualifying for accounts. It’s a condition known as being “unbankable” and it can put you in a bad financial position if you get into this type of situation.

The CFPB’s main issue with credit review practices by banks is that consumer reports are being used, “as crude ‘black lists’ where consumers are turned down for an account simply because their name appears on the list.” This statement comes from CFPB Director Richard Cordray, who continues, “We envision a process that better understands consumers’ needs and can provide an account that is appropriate to their personal circumstances.”

The CFPB’s idea is simple – if you have a bad credit score, it makes sense that you can’t qualify for traditional credit lines, but you still have alternatives, such as secured credit cards, that you can use to build credit and get where you need to be. On the other hand, as the system stands now, if you have bad credit, you may simply be turned down for a bank account with no alternatives offered.

That leads to this “unbankable” condition where consumers can’t even use the most basic tools in our financial landscape, like checking and savings accounts. That can make it harder to manage money and do simple financial tasks like paying bills. It can also mean that you lose income out of every paycheck for things like check cashing and money order fees.

“It is one thing to use a credit report or similar type of consumer report as a means of assuring consumers do not take on more risk than they can handle,” Cordray admits. “Indeed, the bureau would be concerned if banks or credit unions were to grant credit to consumers without regard to their prior credit history.”

With that in mind, the CFPB would encourage banks and credit unions to use consumer credit reports, but instead of barring a consumer from getting a bank account, a bad credit score would mean the financial institution would offer accounts that are specialized for people who struggle to maintain a stable financial outlook.

“It’s understandable that banks would be wary of consumers who may have struggled with credit in the past,” says Gary Herman, “but that shouldn’t put people in a situation where they don’t have any options to help build a stable outlook and budget. New regulations may even motivate banks to come up with new tools that can help consumers learn and grow as credit users.”

What to do if you’re “unbankable” right now

Of course the CFPB has only recently began their investigation of these practices, so if you have bad credit and need a bank account now, you may be stuck in this “unbankable” limbo. So what do you do?

  1. First you need to get a handle on any debt that’s causing your credit score issues. Start by talking to a certified credit counselor to see if you can use a debt management program to consolidate your debt so you can regain control, or if you need a different solution.
  2. Once you have debt under control, review your credit reports to see what they say about you. If there are negative items that you think are old, outdated or incorrect, then consider going through the credit repair process to have them removed.
  3. Finally, you need to take steps to rebuild your credit. Pay loans and credit cards on time. If you don’t have any debt to pay off so you can build credit, consider getting a secured credit card with a low credit limit that you can use to build your way to the credit score you need.
  4. After about six months, reapply for a bank account with the financial institution of your choice to see if you have done enough to get the accounts you need.

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

All Consolidated Credit counselors are certified personal financial counselors (CFC) We've helped 5 million people get out of debt! Call us today and see what we can do for you.

Consolidated Credit is honored to receive the 2012 Excellence in Financial Literacy Education (EIFLE) Nonprofit Organization of the Year award. The EIFLE awards acknowledge innovation, dedication and the commitment of organizations that support financial literacy education worldwide. See what Consolidated Credit can do for you.

Consolidated Credit is honored to receive the 2012 Excellence in Financial Literacy Education (EIFLE) Nonprofit Organization of the Year award. The EIFLE awards acknowledge innovation, dedication and the commitment of organizations that support financial literacy education worldwide. See what Consolidated Credit can do for you.

The National Industry Standards for Homeownership Education and Counseling are a set of guidelines for quality homeownership and counseling services. Industry professionals who adopt these standards can be trusted to provide consistent, high quality advice.
Click here to learn more.

Consolidated Credit Consulting Services, Inc. has been verified as the owner or operator of the Web site located at www.consolidatedcredit.org. Official records confirm Consolidated Credit Consulting Services, Inc. as a valid business. Call us today and see what we can do for you.

Consolidated Credit is a Certified ISO 9001 company, as verified through Bureau Veritas Certification.

Time tested and customer trusted. Consolidated Credit Counseling Services has been a BBB Accredited Business since 1998 and has a current A+ rating. Call us today and see what we can do for you.

View the Consolidatedcredit.org review status

Time tested and customer trusted. Consolidated Credit Counseling Services has been a BBB Accredited Business since 1998 and has a current A+ rating. Call us today and see what we can do for you.

View the Consolidatedcredit.org review status

Consolidated Credit is proud to be an ANAB accredited member. Accreditation by a recognized and respected body such as ANAB ensures the impartiality and competence of our company. To see what we can do for you, give us a call.

U.S. Department of Housing and Urban Development - HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. Consolidated Credit is proud to be a member of HUD and also part of the Hope Now Alliance.

You can save!

With this amount of debt, you'd pay around $xx.xx on a DMP.

FREE Debt Consultation
VE Interactive