A free checking account is one of the first tools of finance most individuals start managing in order to build some credit and qualify for low loan rates. However, unlike obtaining a credit card or a loan, a checking account allows you to directly manage cash you deposit, withdraw and budget yourself.

Instead of using borrowed money paid back in monthly installments, bank checking account funds are accessed with a debit card that spends money you already have on deposit. A checking account gives you easy access to your cash, along with checks and a register to track the balance.

So, since you’re dealing with money you already earned and not a credit loan, why does your credit score come into play?

No Credit, No Problem. Bad Credit, Big Problem.

Checking accounts are generally one of the first accounts individuals use for financial management and credit building because, technically, you do not need a credit history to open one. However, if you want to open a checking account and you do have credit, it better be good credit.

Depending on the financial establishment and your previous relationship with them, some banks will not allow you to open a checking account if you have bad credit.

There are certain stipulations to a checking account banks hold their customers responsible for. Some banks require consumers to maintain a minimum balance in their checking account and all require the ability to budget and monitor the balance to prevent overdrawing.

Banks need to know that you’re reliable before they will trust you with a checking account. In some cases, checking accounts require you to meet a minimum balance at all times, which of course means you need to make regular deposits and budget your money accordingly.

Chances are, if you have bad credit, budgeting and making regular deposits aren’t your strongest attributes.

Credit Score Flagged Through ChexSystems

If you have lousy credit, your past activity will be reported to something called ChexSystems. The report is able to flag down your financial institution and warn them about your issues with mishandling previous checking accounts or credit cards.

If you are listed in this database, you will remain there for up to five years, during which time you might have difficulties opening up checking account. To prevent this from happening, remember to always keep your balance positive and keep an eye on your credit score.

There are a number of different resources online that advertise the availability of checking accounts without a credit check. These claims may or may not be legitimate, but they all seek to accomplish this by avoiding the ChexSystems report.

Similar to credit cards, banks reduce your credit score when they’re not paid back on time. This includes overdrawing your account, not replenishing the funds before the bank shuts down your card or account, writing bad checks or instances of fraud.

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