Can I get a bank account with bad credit?

By Gina Pogol
Mortgage Credit Problems Columnist

James asks: Dear Gina, I know I need to have better credit if I want to buy a house. The problem is that I don't have a bank account, so it's really hard to pay bills on time. But without good credit, I can't get a bank account! Are there bank accounts for people like me that can help me raise my credit score?

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Gina says:

Dear James,

You're right; with bad credit, mortgage lenders won't want to talk to you. The Federal Reserve Bank says that one-fourth of households in America are unbanked or underbanked, and that this presents some challenges.

Bank accounts save money

Folks without checking accounts may spend over 2 percent of their income, as much as $800 per year, on check-cashing services and money orders! Instead of being able to make payments online in about 2 minutes, the unbanked have to take paychecks to check-cashing businesses, then get money orders, buy stamps and envelopes, and mail in their payments, hopefully on time. If the payments get lost in the mail (it does happen!), too bad for their credit rating.


People can get booted by banks for bouncing checks or for nonpayment of bank charges (usually penalty fees). They can end up in the Chex Systems database for bouncing payments to merchants, and may not get out even after paying their accounts. Chex says that reporting companies are under no obligation to remove an entry even if the account is paid in full. These black marks can remain for up to five years!

Bad credit banks?

You can get the convenience of a checking account with a prepaid debit card. It can be used to pay bills online or by phone; to make purchases and withdraw cash; to rent cars and reserve hotel rooms. You can even have your paycheck or government check direct-deposited into it. With most, there is no credit approval process. Unlike a checking account, you can't be overdrawn so there are no penalties. NetSpend offers a card with guaranteed approval, free direct deposit, and fees as low as $5 per month.

The Wal-Mart of banks

Yep, Wal-Mart is expanding its offerings to include financial services, and it's undercutting check-cashing services and money order issuers in typical Wal-Mart fashion. So you can buy tennis balls, celery and underwear at the same place you cash your paycheck.

Not a credit card

Of course, these products are not credit, and they won't report your activity to credit bureaus. But they can make it easier to pay your bills on time, which will eventually show up in higher credit scores and the chance to get approved for a mortgage.

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