How does the bank approval process work if you have bad credit? If you have bad credit, you can be denied a checking or even savings account at certain banks.  But banking site My Bank Tracker explains that the rejection doesn’t stem directly from your credit report but from something called a ChexSystems report.

When you apply for an account, here’s how the bank approval process usually works, according to the site:

“In a typical account application process, the bank uses your name and Social Security number to conduct a routine financial background check. The very first step in this background check is usually taking a look at your ChexSystems report. The information included as part of the ChexSystems report reveals any bad consumer banking history such as outstanding overdrafts or bad checks you have written. Other information reported includes security alerts or freezes.”

More than 80 percent of commercial banks and credit unions in the U.S. have access to this report. And almost all of those that have access will pull it, My Bank Tracker says. According to Credit Karma and Bargaineering, the ChexSystems report can include:

  • Bounced checks
  • The number of financial institution inquiries
  • How many checks you’ve ordered
  • Instances of check fraud and identity theft/fraud
  • Unpaid negative balances
  • Excessive withdrawals

There’s a good chance a bank will reject your application if there are negative hits that are recent, outstanding or seem to reflect bad financial habits. Money for 20s says that most banks won’t let you open an account until these hits are cleared from the report.

According to About.com, most banks don’t check your regular credit reports, but that’s not to say it doesn’t happen, too. My Bank Tracker explains:

“Depending on the financial institution, a credit check may or may not be used to approve your application. Again, any delinquencies and red flags will show the bank that you are unable to manage money responsibly.”

Now that you know how the approval process works, the next step is getting your hands on that elusive ChexSystems report.

Check Your ChexSystems Report

Ordering your report is pretty straightforward, according to Bargaineering. You can request it here, and you’ll need to be ready with the following:

Your current address

Your Social Security number

The address of residences from the past five years

After filling out a form, the report will be mailed to you within five business days. The site offers a sample report, too.