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5 steps to take if turned down for a checking account

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Life can be hard without a checking account. It becomes more difficult to pay your bills and handle daily money transfers without resorting to handling cash and dealing with check-cashing outlets that can take a significant cut of your funds. Unfortunately, you can be denied a checking account for a negative association with one of your past accounts, such as a previous closed account with an unpaid negative balance or a joint account that was abused by the other party.

What should you do if you are denied a checking account? Take a deep breath and start your path to redemption using these five tips.

1. Find Out Why You Were Rejected Ask the bank why you were turned down and what system they used to verify your past records. ChexSystems, TeleCheck, and Early Warning System all provide services to banks looking to research an individual's checking account history. You were likely denied based on the information in one or more of these accounts.

If you are denied a checking account, the Fair Credit Reporting Act (FCRA) allows you to obtain a free copy of your report that prompted the denial. As with the credit bureaus, you can also receive one free copy every twelve months upon request. You can read your credit report for free right now using Credit Manager by MoneyTips. Get the necessary reports so you can fully understand the reason for the denial.

2. Correct any Mistakes Review your reports for any mistaken negative information and work with the bureau to correct the mistake as soon as possible. You will need to provide the necessary evidence to back up your claim, such as receipts proving that a debt was paid.

3. Settle Debts If any unpaid debts are behind your rejection, use the information in the checking report to track down those debts and resolve them. This may take time if you are in a difficult financial situation. Make a budget that allows you to divert enough of your funds to pay off the debts over time. If you want to reduce your interest payments and lower your debt, try the free Debt Optimizer by MoneyTips.

Once the debt is paid, you must contact the check-reporting agencies and ask them to remove the debt from your record. Follow up with the agencies to verify that the report has been changed.

How are you supposed to save and store those funds without stuffing cash under your couch, or pay your bills while you are without a checking account? The next two steps provide guidance.

4. Investigate Second Chance Accounts Some banks offer "second chance" accounts that are designed to help those who cannot get regular checking accounts. These accounts typically come with monthly charges, stiff overdraft fees, and few (if any) of the perks of a typical checking account. Investigate the options with the bank that rejected you, along with other institutions in your area.

5. Consider Prepaid Debit Cards While you correct your banking situation, consider the use of prepaid debit cards as a means of paying your bills and storing your cash. There are many prepaid cards available. Shop around and look for cards that meet your needs while you are without a traditional account.

It may be inconvenient to be without a checking account, but you have alternatives. With a two-track strategy of clearing your past account history and establishing a reliable method of handling your funds in the interim, you can eventually qualify for a traditional checking account with the least amount of hassle. You will also be more appreciative of that account when you restore it, and will take great pains to keep from losing it again.

You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.


Photo iStockphoto.com/BrianAJackson

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