What Is a Deposit Account Score? Why a Bank Can Say No

You have the money and your ID, and you are ready to open a checking account. Then the bank says no. It can feel unfair, especially if you have never missed a loan payment. The reason is often something many people have never heard of: your deposit account record. Banks check it before they open a new account, and a problem in it can stop your application even with cash to deposit.

The short answer

A deposit account score is a record of how you have handled bank accounts. Banks in the US check reports from companies such as ChexSystems before opening a new account. If the report shows unpaid negative balances, closed accounts with money owed, or signs of fraud, the bank may refuse the new account. It is about bank accounts, not loans.

What is a deposit account score?

When you apply for a checking or savings account, the bank does more than check your ID. It wants to know whether you are likely to manage the account well. To answer that question, many banks look at a consumer report made for bank accounts. This is often called a deposit account report, and the result is sometimes called a deposit account score. The best known company is ChexSystems, and another is Early Warning Services.

Think of it as a report card for bank accounts. It does not grade how much money you earn. It records facts about accounts you have had, such as whether any of them ended with money owed or were closed by the bank. Each bank sets its own rules, so one may accept you while another says no, even when both look at the same report.

What goes into your deposit account record?

The report can include several kinds of negative information. The Consumer Financial Protection Bureau, known as the CFPB, says banks may deny an application when the report holds facts such as these.

• Unpaid negative balances: an account that stayed below zero and was never paid back.
• Accounts closed with money owed: an account the bank closed because money was still owed on it.
• Suspected fraud: signs that an account was used in a dishonest way, or that the identity used was not real.
• Bad checks: checks written when there was not enough money in the account to cover them.
• Many openings in a short time: opening several accounts quickly, which some banks see as a warning sign.

Not every item on a report is bad news. Some reports simply show the accounts you have opened and closed. But the negative facts above are the ones that usually cause a refusal. An account you share with someone else can affect your record too, if the shared account ends with money owed.

How is this different from a credit score?

A credit score is about borrowing. It sums up how you have handled loans and credit cards, such as whether you paid them on time. A deposit account score is about bank accounts. It covers how you have handled checking and savings accounts, such as whether any account ended with money owed. A person can have a good credit score and still be refused a bank account, or the other way around.

There is one overlap worth knowing. The Consumer Financial Protection Bureau says some banks also look at your credit report when you apply for a checking account. So poor credit can add to the problem, but it is not the main thing a deposit account report measures. If a bank refuses you, ask which report it used.

How long do bad records stay on file?

The honest answer is that it depends on the reporting company and the type of record. As a general rule, ChexSystems says that information can stay on its reports for up to five years. That is general information, not a promise about any one record, and timing can differ. The key point is that a bad record is not there forever, and paying what you owe helps you move on sooner.

A worked example

Example only. The numbers and names below are made up to show how this can work.

Maria opened a checking account when she was 20. One month she spent 40 dollars more than she had, and she never paid the 40 dollars back. The bank closed the account, and the unpaid balance went on her ChexSystems report. Five years later, Maria tried to open an account at a new bank for her pay. The bank checked her report, saw the unpaid balance, and refused the application, even though she had 500 dollars ready to deposit.

1. Maria asked the bank which report it used, and the bank said ChexSystems.
2. She asked for her free ChexSystems report and found the old 40 dollar balance.
3. She paid the 40 dollars to the first bank and kept the receipt and the account number.
4. She asked another bank about a second chance account while the old record aged off.

Maria did not fix everything in one day, but each step gave her more control: she knew what the bank saw, she cleared the debt, and she found a bank willing to give her a fresh start.

How to get your free ChexSystems report

In the US, you can get one free copy of your ChexSystems report each year. The Consumer Financial Protection Bureau explains that you can order it online, by phone, or by mail, and you can also get free reports from other companies, such as Early Warning Services. When the report arrives, read it line by line.

It also helps to ask the bank that refused you for the reason in writing. Banks that rely on a consumer report must send you a notice that names the reporting company and explains your right to a free copy of that report. That notice tells you exactly which report to check.

How to dispute an error

Mistakes happen, and a wrong entry can cost you an account. The Consumer Financial Protection Bureau says that if you spot an error, you should dispute it in writing, and it is best to send the dispute to both the reporting company and the bank that supplied the information. Say what is wrong and include copies of any papers that back up your claim. Keep a copy of the letter for yourself.

The company must look into the dispute and tell you the result. If the facts cannot be proven, the company should remove the entry, and the bank should correct its own records too. If the company disagrees, you can add a short note to your file explaining your side.

Second chance bank accounts

The Consumer Financial Protection Bureau also explains that some banks offer lower risk accounts, often called second chance accounts, for people who have had trouble in the past. These accounts may have limits, such as no overdraft, no paper checks, or a monthly fee, and they may require direct deposit. The aim is to let you show steady use over time. Ask banks in your area whether they offer one, and read the terms first.

What to do if a bank says no

A refusal is not the end of the story. Take these steps, in order:

1. Ask the bank which report it used and why you were refused.
2. Get your free copy of that report and read it carefully.
3. Dispute any errors in writing and keep copies of everything you send.
4. Pay any real debt you owe and keep the proof that you paid it.
5. Ask other banks about a second chance account and compare the terms before you choose.

Keep records, and do not pay anyone who promises to erase a true record for a fee. No one can legally remove correct information from your file before its time is up. The honest path takes longer, but it is the only one that lasts.

Quick answers

Related guides

• What Does Overdraft Mean? Bank Overdrafts and Fees Explained
• Bank Accounts That Are Free: How No Fee Bank Accounts Really Work
• How to Get a Free Copy of Your Credit Report

Further reading

• Why was I denied a checking account?, from the Consumer Financial Protection Bureau, for the official guide to why banks refuse accounts.
• How do I get a copy of my checking account consumer report?, from the Consumer Financial Protection Bureau, for how to order your free report.

This content is educational only. It is not financial advice.