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What Do Banks Look For When Opening Bank Accounts?

What Do Banks Look For When Opening Bank Accounts?

Welcome to the new world order. Even if you want just a plain vanilla savings or checking account, be ready to impress the banker.

As you might imagine you’re going to need to show identification – a driver’s license, or government issued identification, and those all important digits your Social Security number, your date of birth, your address and proof of residency, like perhaps a utility bill. If you’re opening an account online, you could also be asked to print out a signature document and mail it in, along with copies of identification. And, of course you’ll need some cash.

The process is a bit tougher if you’re opening an account for your business. They’ll want more paperwork. Not only will they want your Social Security number but the EIN for your company. Just to make sure you’re legit the bank or credit union will want a copy of your business license or your certificate of incorporation. However, if you’re flying solo and are a sole proprietorship what’s required may be different, it’s worth your time to find out before you make the trek to the bank to find out exactly what you need. Similarly, the bank may want to see your DBA (Doing Business As) of FBN (Fictitious Business Name) if you want to accept electronic fund transfers and checks in your business name. You will need register the name, and file it, before it can be used. Be prepared to answer any number of questions, as banks are under increasing pressure to know who they are dealing with, especially in this environment of heightened terrorism.

What to expect

But for sure, nothing is simple any more. There are all sorts of things that cause hiccups in the process and keep you from getting an account. What matters most? "When processing applications, banks will take a look at your banking history, including if you have any outstanding checking account-related debts to other banks," says Greg Cunningham, vice president in customer experience for U.S. Bank. "We have resources online to help people address these issues."

If your history shows that an institution previously closed your account for a reason like unpaid overdrafts; that would be a blemish for sure. It’s problematic too, if you were suspected of fraud related to a checking account or had a joint account with someone else who had these types of problems. The bank or credit union will typically pull your credit report.

Just like you need to check your credit report annually, you can access your ChexSystems report for free once a year.

"While consumers have generally become more aware of the importance of credit scores and credit reports, relatively few have thought about the services that report on their bank account activity," said Keith Ernst, an associate director of the FDIC’s Division of Depositor and Consumer Protection in charge of consumer research, in a prepared statement. "So, when people are denied an opportunity to open a new deposit account, often they are surprised to learn that negative information about a past checking account can be shared."

There are few secrets any more. ChexSystems keeps track of all your sins. If your bank account is closed for "cause" ChexSystems’ database likely has that info because your bank ratted you out. Some banks will tell you straight up they will not open a checking account for you if you have one or more incidents reported to ChexSystems.

Just like you need to check your credit report annually, you can access your ChexSystems report for free once a year. You want to see if you’ve been reported or if there are any errors. If there are mistakes, you can write them and request verification of the record and removal if it cannot be verified.

Don’t despair though, there is something called Second Chance Checking accounts were an institution will open an account with the notion of trusting that you’ll do better this time around. Shop around for accounts that may be most suitable for you (CFPB's consumer guide).

Know too, that some banks and credit unions will require you to pay any old, unpaid charges and fees before you are allowed to open a new account. For help when you’ve been denied an account, go here.

You don’t want to be without an account. Says Cunningham, "Having a bank account is an important step in taking control of your money, and using it to achieve your goals."

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Anonymous   |     |   Comment #2
By reading this article, I thought I can learn something new, but all of it is just a normal business practice that most of us went through it many times. If there was a short cut to opening bank account, most of us would have known already, I guess.
Anonymous   |     |   Comment #3
Throw EBT cards into the mix and these numbers evaporate.
paoli2   |     |   Comment #4
Sorry if I have a weird sense of humor but I found it "funny" that the article seems to think "we" have to impress the banks.  With the bottom of the toilet rates they are so kind to offer us, I would think they should have to impress us.  I know what the writer actually means but maybe she is too young to remember the really, really good old days when we got 10 to 12% interest rates on CDs and I still have my beautiful but a bit dusty stuffed rabbit I was allowed to select as the "gift" I wanted to go along with those monumental CD rates!!  No impressing needed in those days.  The banks actually seemed glad to get our  money and rewarded us handsomely for selecting their bank.  Ok so I am giving away my age but it must grieve the younger generation to learn about how far we have come from when people could actually really "save" money for their senior years or just for whatever.  I don't think these modern bank accounts allow anyone to "achieve their goals" unless they have very low expectations.
Anonymous   |     |   Comment #8
The good old days will never come back and you do not have be old to realize that.
There are charts, bars, archives of everything in the past, going almost 100 years back.
The national debt was very very small, the real GDP was growing at 8% per year after year, USA had trade surplus, we lent money to everybody, including China and Russia.
Now, after Clinton NAFTA and Bush's wars and Obama the money spender and country destroyer with PTAs, we are all going into poor house, few more years tops before the dollar collapses and we are all wiped out.
Anonymous   |     |   Comment #5
To request your free annual report from ChexSystems, look for the link to “Free FACTA Report” on their homepage https://www.chexsystems.com, or go directly to https://www.chexsystems.com/web/chexsystems/consumerdebit/otherpage/FACTAFreeReport/.
Anonymous   |     |   Comment #6
Every inquiry, including your own, counts as request for 24 months, be careful with Chex. Five or more inquiry in 24 months, can be an excuse for denying you a bank account.
Anonymous   |     |   Comment #7
Better yet...tell your bank your deal does not allow using info, etc. unrelated to account activity, i.e. it is by contract "they" cannot share info to anyone!
Anonymous   |     |   Comment #9
It stays on longer than 24 months i have some that are showing for 3 years.
Anonymous   |     |   Comment #10
The negative info can stay up to 10 years.
Anonymous   |     |   Comment #11
And, the source of all this wisdom on time?  Thanks
Paul Colely
Paul Colely   |     |   Comment #12
A positive aspect is there are more non-Chexsystems banks and credit unions available. An internet search will reveal sites that offer both "second-chance" checking, and financial institutions that do not use Chexsystems.
Paul Colely
Paul Colely   |     |   Comment #13
Early Warning Services - Some banks also check this speciality credit reporting agency before approving checking and savings accounts. In additional to Chexsystems, you should get your free annual report to see if there is anything of concern: (800) 325-7775