Getting a current account with bad credit

When you’ve had a bad credit history, it can be daunting trying to get back on track, especially if you don’t think that you have any options. But the future’s not as bleak as staring into an empty wallet – there are options for a bank account – you just need to know what’s out there.

When you’ve had a bad credit history, it can be daunting trying to get back on track, especially if you don’t think that you have any options. But the future’s not as bleak as staring into an empty wallet – there are options for a bank account – you just need to know what’s out there.

Anelda Knoesen
From the Money team
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Posted 15 SEPTEMBER 2020

What bank accounts can I get with bad credit?

Opening a standard  current account  means that a credit check will be run on you. If it comes back and shows that you don’t fit that particular bank’s criteria, then your application could be rejected. Perhaps you’ve  defaulted on past loans  and credit or even have a CCJ (county court judgement) against you. If it happens, it can be a horrible feeling, but take heart knowing that you aren’t the first and you certainly won’t be the last person to ever be turned away from getting a regular bank account due to bad credit.

If this happens, then you can opt for a basic bank account – these will give you similar but not all the same features as a standard account. Banks will differ slightly over what they offer, but on the whole, this is what you can expect from a basic account.

Features you’ll get  

  • Have your income paid into your account
  • Deposit cash and cheques for free (excluding foreign currency)
  • Withdraw money over the counter or from a cash machine
  • Set up standing orders and Direct Debits
  • A debit card which can be used in store and online
  • Offers free banking (no monthly fee)
  • Check your balance over the counter, at a cash machine, online or on your phone

Features you won’t get

  • An authorised overdraft facility
  • Interest paid on any credit in your account
  • Chequebook

Am I eligible for a basic bank account?

Basic bank accounts are aimed at anyone struggling to open a standard bank account, and, sometimes, they’re known as bank accounts for bad credit. Most people are eligible for a basic bank account; unless you’ve been convicted for fraud, in which case you may find it more difficult, as banks reserve the right to not give you an account if you have a fraud conviction.

Some banks will automatically suggest a basic bank account if you don’t meet the requirements for a standard current account. However, if you do meet the criteria for a standard bank account then you might not be able to get a basic one.

In order to open one, you’ll need a form of ID, such as your passport or photographic driving licence, and proof of where you live like a utility bill or benefit book.

Are these accounts just for those with bad credit? 

Basic bank accounts aren’t just for those with bad credit. Although they’re most common for those with a bad credit score, you can ask your bank whether you may be eligible to open one, regardless of your credit situation.  
We appreciate that finding the best bank account for bad credit can be overwhelming. Which is why, at  Compare the Market,  we make it easy to search and compare accounts.

What other options are there if I have bad credit?

Alternatives to basic accounts include:

Credit unions that offer current accounts 
While not all of them do, credit unions can provide you with a bank account or loan. You will have to pay a monthly fee, usually no more than £5, but these can be a viable alternative if you’re struggling to open a standard current account. With the potential to even secure a small loan, credit unions offer something you wouldn’t have access to with a basic bank account. However, credit unions tend to be locally based, so having access to one is pot luck dependant on where you live. 
Pre-paid bank account 
A pre-paid bank account allows you to deposit and withdraw money, including your salary or other forms of income. You can also set up direct debits and withdraw money at cash points, although these may both incur extra charges. You may also face a monthly account fee. There are a few accounts out there that don’t undertake credit checks, but this can be an expensive option – especially if you’re already having difficulty with money.

Improving your credit rating 

Improving your credit rating could improve your chances of opening a standard current account in future – consider:

  • Budgeting to make sure you stay within your means and don’t end up constantly over your overdraft or missing repayments.
  • Check your credit report and ensure the details they have on you are correct.
  • Sever any financial ties you have with ex partners or housemates so that their credit history doesn’t blemish yours.
  • Put yourself on the electoral register (find out more on your local council website) lenders like to see stability and verify you are who you say you are.
  • Always stay on top of your money by setting up standing orders or Direct Debits to pay off all or at least the minimum on any monthly repayments you have.

You can also find advice on how to improve your credit rating with the Money Advice Service.

Can I open a bank account online with bad credit?

Many bank accounts are available through online application. If you’re struggling with a bad credit score, you may instead be recommended a basic bank account. Many providers will allow you to open a basic bank account online, however, some may require you to visit a branch, apply on the phone, or via post.

Can I open a bank account without a credit check?

While opening a current account usually requires a credit check, most basic bank accounts do not. This is because basic bank accounts don’t offer an overdraft service, which is known as a credit product. Without this included in the account, you should be able to open one with no credit check required.

Can I get an overdraft with bad credit?

Each person’s credit situation is different, so the best place to start is by simply talking to someone at your bank. Discuss your situation and ask what the chances are of you being accepted for an overdraft. They may even be able to carry out a soft credit check on you. This won’t appear on your record, or impact it in any way, and may give you a greater idea of whether you’ll be accepted or not.

If you’re applying for an overdraft with a bad credit score, you should limit yourself only to what you need. The lower the overdraft limit you apply for, the greater the chance your application will be accepted. Once you prove you’re responsible with a smaller amount, you may be able to extend it, in future.

If you’re only eligible for a basic bank account, these don’t typically offer an overdraft.

Are pre-paid accounts an option for bad credit?

Pre-paid bank accounts are a good option, if you’ve got a bad credit score, because there’s no credit check carried out during your application. This is because there’s essentially no risk of you getting yourself into any debt, because you’re only allowed to spend what you’ve already put in.

Be sure to shop around for this type of account, though. You may find that they come with charges for relatively simple features such as direct debits, depositing and withdrawing cash, as well as a potential monthly account charge.

Can I get a debit card with these accounts? 

You can receive a debit card with most types of bank accounts. Even if you’re opening a basic bank account, you should still be entitled to a debit card. 
However, a pre-paid account will provide you with a pre-paid card, which works similarly to a debit card, but only allows you to spend the money you’ve already deposited.

Do basic bank accounts come with fees?

While you should always check with the provider, before opening your account, most basic bank accounts come fee free. The UK’s 10 largest banks all offer fee-free basic bank accounts, while many others do, too.

You may still face charges for things such as having a direct debit bounce, due to not having enough in your account, or making purchases and withdrawals abroad. Always check these conditions with your account provider.

You can find out more information, including a list of banks offering fee-free accounts, here.

Can you be refused a basic bank account?

It is possible to be rejected for a basic bank account. Basic bank accounts are designed for those with a bad credit score, and some banks may refuse you this type of account, if you’d instead be eligible for a standard account.

You may also be refused a basic bank account, if you have a criminal record for fraud (other criminal convictions won’t necessarily see you refused), or if you fail to carry out the application process. This may involve a failure to provide sufficient ID or proof of address, or refusing a credit check. You don’t have to pass a credit check, but the bank may want to carry one out, regardless.

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