- So apparently there's this thing called
a banking score that affects your ability
to open checking accounts with a bank.
In this video, we're going to explain exactly
what a banking score is and then how to fix it.
If you've had trouble with banking in the past.
(playful music)
Hey guys, welcome back to The College Investor
Investing And Personal Finance For Millennials.
So I've never heard of a banking score before,
but you'll wanna pay close attention to it,
if you've had trouble with banking in the past.
So first, let's define what a banking score is.
So a banking score is a score created by ChexSystems,
ChexSystems is a credit reporting agency
and it's going to measure your score
between a range of 100 to 899.
And the higher your score is
means that you are a lower risk customer
and therefore the likelihood of being able
to open up different types of banking accounts.
Now, the banking score is based on things like
number of bounced checks, number of account closures,
number of inquiries financial institutions
have made about you and how many check orders you've placed.
If you've had a history of bouncing checks
or you have late fees, overdraft fees, that sort of thing,
there are some things that you can do to make sure
that you can improve your banking score.
The first thing that you wanna do though,
is to request a report from ChexSystems.
Now, when I first went online to ChexSystems,
they requested a whole bunch of personal information
from me such as my address, Social Security number,
that sort of thing.
The interesting thing about this process of obtaining
your report and obtaining your score for that matter,
is everything seems to still be done on manual terms.
So when I filled out my information
and submitted the request,
I actually got a confirmation page that said
that they would physically mail me my report.
So this isn't an instant thing that you can get access to,
which is kind of a bummer.
I think you would wanna know about this stuff right away,
but it's a manual thing.
Also, if you want your score,
which is different than the report,
you actually have to mail in a physical request form
in order to get that score.
Check out our blog post we will have the mailing address
in which you can use to request and submit that form to.
It's just a big pain in order to get the score.
I'm not sure why.
Similar to your credit report
that you would request from TransUnion, Experian, Equifax,
you are entitled to one free report
from ChexSystems per year.
So if you've had trouble banking in the past,
there are actually five different ways
that you can improve your banking score
so that you can get access to regular checking
and savings accounts.
The first thing that you'll wanna do,
is to ask your bank to waive overdue fees.
Now this doesn't always work.
But if you've been banking with the same bank
for a long time, who knows?
They may be willing to waive some of those fees for you,
you never know unless you call and ask.
The second way is to ask former financial institutions
to remove negative information from your ChexSystems report.
Again, you don't know if you don't ask and call,
but tell them that you were looking to improve
your banking situation with them,
that you've been a customer for a long time
if you really have.
And this could be a good benefit for you
to improve that banking score.
Next you wanna dispute errors.
If there are any errors on your report
and then what you see in your own transaction history
and statements you wanna compare those two
and then use that information send screenshots
if you need to to your bank.
Look for these errors and make sure you were documenting
those steps along the way.
The fourth step to improving your banking score
is simply refining old habits.
If you had a habit of over-drafting
or bouncing checks or floating checks,
now is the time to pull back and take a look at
what you're doing with your banking situation.
It's a good idea to always have a cushion
in your checking account aim for a thousand dollars.
Your 1000 dollar balance in your checking account
is now your new zero.
If you can focus on that thousand dollars
as your zero balance,
then you'll never run into those issues
of over-drafting again.
Building a buffer is one thing,
knowing your account balance is another.
You have got to get into the habit
of checking your bank account balance.
If this has been an issue in the past,
knowing exactly where you stand, building in budgets
will absolutely help you with this as well.
Knowing when income is coming into that checking account,
and then knowing what cash flow is going out of that account
is going to help you maintain that checking account.
And you'll absolutely,
I cannot stress this enough, avoid payday loans.
They are the sharks of the finance world,
and you want to avoid them as much as possible.
These are detrimental to your banking score.
They're detrimental to your credit score too.
So avoid, avoid, avoid we can't stress that enough.
And then you'll want to manage your credit card responsibly.
Make sure you are paying off that balance
every single month back to a zero balance
because this may play into your banking score.
The fifth way that you can improve your banking score,
is to look for second chance checking accounts.
We have an entire blog post dedicated
to what second chance checking accounts are.
But you'll want to look for checking accounts
that have zero monthly maintenance fees,
zero admin fees, transfer fees, all those things,
wanna make sure that these are zero fee accounts for you.
And many local credit unions
will offer memberships like this.
So be sure to check out our blog post
on second chance checking accounts
if you fall within the scenario.
So bank accounts undoubtedly are the easiest way
to conduct to your finances and just operate
your financial life, operate the bills that you have to pay,
it makes life so much easier than trying to do this
in another way such as a prepaid debit card.
Now prepaid debit cards are acceptable forms
of maybe accepting direct deposits from your employer,
and there are also prepaid cards
that you can use to deposit checks.
The only thing about this is those prepaid debit cards
you're going to have to pay a reload fee.
And sometimes a fee for even cashing in checks
using your prepaid debit card.
Prepaid debit cards such as the Walmart MoneyCard
are going to allow you to do these things,
and they're going to offer a bit lower of a fee
than you would with check cash-in outlets but still,
bank accounts are going to be your best bet
in terms of not paying these types
of reloading fees or even just depositing checks.
Overtime your banking score will improve
if you follow those five steps that I mentioned,
and you should be able to apply for a new checking account.
If you're still denied, give it six more months a year,
really follow those healthy habits and then reapply.
For more information on banking scores,
those second chance checking accounts and more,
be sure to visit thecollegeinvestor.com.