Current accounts for bad credit

If you have a bad credit score, perhaps because you’ve defaulted on credit or have a county court judgement (CCJ) against you, a basic bank account or pre-paid bank account could be your best bet.

That’s because opening a standard current account means undergoing a credit check which could mean your application gets rejected.

Basic bank accounts and pre-paid bank accounts are easier to be approved for. Using one responsibly could also help improve your chances of getting a standard current account in future.

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

• An authorised overdraft facility.

• Interest paid on any credit in your account.

• A cheque book.

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.

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.

Yes, a bank account for people with bad credit 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. You should keep in mind that it’ll take more than that to improve your score, however.

You’ll need to prove that you’re responsible with your money by:

• Having a regular form of income

• Paying any bills, direct debits, and standing orders on time.

Once you’ve done that over time, you may be able to upgrade your bank account for poor credit to a standard current account.

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.

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.

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.

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.