Credit is more than just a plastic card you use to buy things - it is your financial trustworthiness. Good credit means that your history of payments, employment and salary make you a good candidate for a loan, and creditors - those who lend money or services - will be more willing to work with you.
Having good credit usually translates into lower payments and more ease in borrowing money. Bad credit, however, can be a big problem. It usually results from making payments late or borrowing too much money, and it means that you might have trouble getting a car loan, a credit card, a place to live and, sometimes, a job.
Creditors often look for bank accounts as a sign of stability. A bank account also gives an indication of how you will pay your bills. If you fill out a credit application and cannot provide a checking account number, you probably won't be given credit.
A savings or money market account, will also improve your standing with creditors. Even if you never deposit additional money into the account, creditors assume that people who have savings or money market accounts use them. Having an account reassures creditors of two things: You are making an effort to build up savings, and, if you don't pay your bill and the creditor must sue you to collect, it has a source to collect its judgment.
Just because you've had poor credit history, you shouldn't be denied a bank account. Shop around and compare fees, such as check writing fees, ATM fees, monthly service charges, the minimum balance to waive the monthly charge, interest rates on savings, and the like.
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Did you know?
If you need to work on your credit report, the FTC warns that no one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete.
There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act (FCRA).
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You might be denied an account, however, if you have a bad check writing history. Check verification companies keep track of banks' experiences with their customers, much as credit bureaus do for creditors. Most banks will check your check writing history with a check verification company before they will open an account for you.
If you are denied a bank account because of information provided by a check verification company, call the company to discuss the problem and try to provide information that resolves it. If you can't resolve the problem informally, you can dispute incomplete or inaccurate information in the company's files just as you can with a credit bureau. Some popular check verification companies include: ChexSystems, Global Payments (formerly CheckRite), International Check Services, SCAN, and Telecheck.
If you open a checking account, be very careful not to bounce checks that you have written. A new federal law called "Check 21" makes it harder to avoid bouncing checks. This law allows banks to process electronic images of checks instead of the paper originals. One result is that checks clear much faster than most of us are used to. Consumer representatives urge consumers not to write a check unless the funds are already in the account to cover it.
If you bounce a check to a creditor, it most likely will report a late or missed payment to a credit bureau, jeopardizing your hard work repairing your credit. A history of bounced checks also may make it harder to open bank accounts in the future.
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Remember -
The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies ? Equifax, Experian, and TransUnion - to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation's consumer reporting companies. The Federal Trade Commission (FTC), the nation's consumer protection agency, enforces the FCRA with respect to consumer reporting companies.
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Michael Saunders has an MBA from the Stanford Graduate School of Business. He edits a site on how to
Fix Bad Credit and maintains the
Handsnet - Economic Security Site.
