card guide
Bank Accounts For Bad Credit Applicants

With all the different products on the market today there must surely be a Bank Account available for somebody with a low credit rating. Or is there?

Credit where credit’s due

There are two main credit rating agencies in Britain: Experian and Equifax. They provide information to all the financial institutions about how reliable a risk you appear for the purposes of lending money.

These agencies take into account how you have handled your debt in the past: so how you have paid back credit cards, how you have managed past overdrafts, whether you are up to date on your mortgage repayments, how well you pay your utility bills. In plotting a credit score for you from 1 to 1000, they even take into consideration the postcode in which you live and whether you are on the electoral register. At the end of all this assimilation of data you will be awarded a number and that is your credit rating: 1 being the lowest and 1000 being the highest i.e. the most useful to financial institutions.

“Most useful” in this case means the financial institution will get its money back and is likely to make some from you as you will probably incur a few charges along the way.

To the banks!

It’s common knowledge that Bank Accounts are given to people with regular incomes, but just occasionally there may be somebody who applies for a standard personal bank account and is turned down. If this happens to you it could be due to a poor credit rating.

The Bank does a credit search on every potential customer who applies for a bank account and if the data reveals a low rating they will turn that person away. A low credit rating can be caused by failure to pay credit cards on time, defaulting on a mortgage, or major mortgage arrears, failure to pay utility bills, not being registered on the electoral register, or even just simply not having had any debt with any financial institutions before.

But you want a Bank account, so how can you get one?

Basic Bank Accounts

The answer is to apply for a Basic Bank Account. These were instigated on command of the Government in response to findings indicating something like one in twelve people in Britain were not able to get personal accounts, mainly due to low income.

These Basic accounts provide cash and debit cards, and the usual facilities for paying in and taking out money, but they do not offer cheque books or any overdraft provision.

This means that the Bank is not taking a risk on those who use these accounts, they are merely offering a service through which the customers can utilise their own money.

This is why people who have a poor credit rating can open a Basic Bank account. As long as you are not currently under bankruptcy proceedings most of these accounts, which should be available at every Bank, can be opened. There are even some Banks that will accept Bankrupts.

Try and try again

When applying for a Basic Bank account you may have to try extra hard to explain what you are after, as you may be met by blank looks from staff behind the glass. This is because most banks don’t actually train staff about the existence of these accounts. In most branches you won’t even see any leaflets advertising these accounts. The reason is, of course, the Banks don’t make any money out of them but they are obliged by Government to provide the service to the public.

Thankfully by using Bank Accounts like these people with a poor credit rating can start to build a banking history for themselves and move on up to ordinary personal accounts in a comparatively short space of time.

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Posted on: [ November 03, 2017 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon