Bank accounts for bad credit

If you have a bad credit history, it can be daunting trying to get back on track. 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.

If you have a bad credit history, it can be daunting trying to get back on track. 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.

Rob Silvey
Money expert
10
minute read
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Posted 18 FEBRUARY 2020 Last Updated 21 MARCH 2022

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 showing 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 have a CCJ (county court judgement) against you.

If this happens, there are two main options for you. Basic bank accounts and pre-paid bank accounts are easier to be approved for and could help improve your chances of getting a standard current account in future.

What is a basic bank account?

Basic bank accounts are aimed at anyone struggling to open a standard bank account. They’re sometimes known as bank accounts for bad credit because they’re largely used by those with a poor – or even no – credit history.

Basic bank accounts will give you similar features as a standard current account but without the bells and whistles. 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 that can be used in store and online.
  • Free banking with no monthly fees.
  • Balance checks over the counter, at a cash machine, online or on your phone. 

Features you won’t get 

What do you need for a basic bank account?

Almost anyone can get a basic bank account, although different banks have their own application processes. Some will let you apply online, while others might need you to pop into a branch. To open one, you’ll need a form of ID, such as your passport or photocard driving licence, and proof of where you live like a utility bill or benefit book. 

Because a basic bank account doesn’t give you an overdraft, it isn’t a credit product. This means you shouldn’t need to pass a credit check to open an account. That said, some providers will still want to run a check anyway, so make sure you find out about this before applying, as the check will appear on your credit report.

Are basic accounts just for those with poor credit? 

Basic bank accounts aren’t just for people with bad credit. Although they’re most commonly used by those with a poor 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. This is why, at Compare the Market, we make it easy to search and compare accounts.

Can you be refused a basic bank account?

It’s 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’re 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 complete the application process - perhaps because you don’t provide appropriate ID or proof of address, or you refuse a credit check. You don’t have to pass a credit check, but the bank may want to carry one out regardless.

What are pre-paid bank accounts?

An alternative to a standard current account, a pre-paid bank account allows you to deposit and withdraw money, including your salary or other forms of income. A pre-paid bank account will only let you spend what you put in, which means you won’t have access to an overdraft and can’t get yourself into debt. 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.

How to get a pre-paid bank account if you have bad credit

The main account providers, like the big banks, don’t usually offer pre-paid bank accounts, but there are providers out there. Pre-paid bank accounts can be a good option if you have a bad credit score because there’s no credit check carried out during your application. And that’s because there’s essentially no risk of getting yourself into any debt as you’re only allowed to spend what you’ve already put in.

You should be able to apply for most pre-paid accounts online. Once you’ve been accepted, the account should be opened straight away, but you’ll need to wait for your card to arrive in the post.

Do pre-paid bank accounts come with fees?

Pre-paid bank accounts do often come with fees. These vary among account providers, but you may find that they come with charges for relatively simple features like direct debits, depositing and withdrawing cash, and a potential monthly account charge. Because of this, it’s important that you check for any fees before opening a pre-paid bank account.

Can you be refused a pre-paid bank account?

A pre-paid bank account doesn’t offer an overdraft, so it’s not a credit product. You shouldn’t need to face a credit check to be accepted, so you’re more likely to be approved for a pre-paid bank account than a standard current account. But if you’ve previously been convicted of fraud, your application could be rejected.

How to improve your credit score 

Improving your credit rating could boost your chances of getting a standard current account in future. Tips include: 

  • Budgeting to make sure you stay within your means and don’t end up getting into debt.
  • Checking your credit report and making sure the details on your file are correct.
  • Severing any financial ties you have with ex-partners or housemates so that their credit history doesn’t blemish yours.
  • Putting yourself on the electoral register (find out more on your local council website). Lenders like to see stability and verify that you are who you say you are.
  • Always staying on top of your money by setting up standing orders or direct debits to pay your bills on time.

Find out more about checking your credit score.

Will a bank do a credit check if I want to open a current account?

If you want to open a standard current account, banks will run a credit check on you. This is because regular current accounts have access to an overdraft, which is a type of credit. Your current credit score and past behaviour with credit will affect your chances of being approved for a current account.

Can I open a bank account without a credit check?

While opening a current account usually requires a credit check, most basic and pre-paid bank accounts do not - because they don’t offer any credit features, like an overdraft. Just be aware that some providers may choose to run a check anyway.

Could bad credit bank accounts improve my credit score?

Yes, a bad credit bank account could help improve your credit score, but not on its own. It’s all about how you use that account. Not having an overdraft will mean that you can’t get the account into debt, which is an obvious way of preventing your credit score from getting worse, but it will take more than that to improve your score.

You’ll need to prove that you’re responsible with your money. Having a regular form of income, as well as paying any bills, direct debits and standing orders on time, will prove that you can be trusted to manage your money. Once you’ve done that over time, you can ask your bank to upgrade your account to a standard current account.

What other options are there if I have bad credit?

If you don’t think a basic bank account or pre-paid bank account are the right fit for you, here’s a couple of alternatives you could apply for:

Credit unions that offer current accounts

While not all of them do, credit unions can provide you with a bank account or loan. You’ll have to pay a monthly fee, usually around £5 to £12, 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 depends on where you live.

Debit card based accounts

You might be able to find other card-based accounts that don’t run a credit check on you. This means you’re more likely to be accepted, even if you have a bad credit score. These accounts will let you pay in your salary and set up direct debits to pay your bills. However, they normally come with fees. These range from monthly account fees, transaction fees or charges for cash withdrawals.

Frequently asked questions

Who is eligible for a basic bank account?

Most people are eligible for a basic bank account; unless you’ve been convicted of fraud, in which case you may find it more difficult. 

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

Do basic bank accounts come with fees?

While you should always check with the provider before opening your account, most basic bank accounts are fee-free.

But you could still face charges for having a direct debit bounce because you don’t have 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, at MoneyHelper.

Can I open a bank account online with bad credit?

Many providers will allow you to open a basic bank account online, although some may require you to visit a branch, or apply by phone or by post.

Can I get a debit card with these accounts?

You can get a debit card with most types of bank account. Even if you’re opening a basic bank account, you should still be entitled to a debit card. 

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.

Can I get an overdraft with bad credit?

Each person’s credit situation is different, so the best place to start is by 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 credit record or impact it in any way, and might give you a greater idea of whether you’ll be accepted or not. 

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

What are the disadvantages of poor credit current accounts?

The main disadvantages of bad credit current accounts are the features you’ll be missing from a standard account. The biggest one is that you won’t have access to an overdraft. You also might not be able to set up standing orders, earn interest or use a cheque book.

Can you open a joint bank account with bad credit?

You can, but it’s not usually a good idea if one of you has a poor credit history. That’s because when you open an account together, your credit ratings will be linked. So, someone with a low credit score can negatively impact someone with a high score and make it more difficult for them to borrow money.

Can I switch basic bank accounts?

Yes, switching basic bank accounts should be a straightforward process. Simply open a basic account with your new provider and they’ll take care of the switch for you under the Current Account Switch Guarantee. They’ll transfer all of your outgoing and incoming payments, and tell your old bank to close your account. This should all take place within seven days.

Can I get a bank account if I’m unemployed?

If you’re not in work, you should still be able to open a bank account, although your options may be limited. For example, many current accounts require a minimum deposit each month, usually your salary. A basic bank account may be your best option. This enables you to pay your bills on time and receive income like state benefits, but it won’t come with any perks like cashback or an overdraft facility.

Can I upgrade a basic bank account?

If you meet the eligibility criteria and have an acceptable credit score, you can ask your bank to upgrade you to a standard current account. Before you apply, it might be worth running a soft search eligibility check. This will tell you whether your application to upgrade is likely to be successful but won’t leave a mark on your credit file. Some banks may even take the lead in upgrading your account if they think it’s time to elevate your status. They’ll write to you, giving you notice that they intend to change your account.

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