Like it or not, we all need some form of bank account but sometimes it can be a little tricky opening one if you have a bad credit history, on a debt management plan, and IVA or if you have bankruptcy against your name. Fear not though – there are a growing number of specifically designed bank accounts for bad credit.
As we came through the mother of all recessions more and more of us are left with a less than perfect credit history and that’s why there are bank accounts tailor made for those in this situation – accounts that can be guaranteed to be opened for you regardless of your past or present financial situation. No one need be without a bank account.
It’s difficult to manage without a bank account these days – in many cases wages are paid by direct transfer, and it’s direct debit this, standing order that, payments by check or debit card, cashback, cash machines … everything hinges around having a bank account.
Apply for a standard bank account and you’ll be credit checked – with a reasonable credit rating there should be no problem but for those with a bad credit history it’s common for applications to be rejected and of course this rejection leaves another footprint on your credit file making it even harder the next time you apply.
A bad credit bank account will often be available without the need for a credit check – the reason being that there’ll be no form of credit provided … no overdraft facility, no credit card etc and also your identity will be confirmed by alternative means. It IS a bank account though providing access to all standard facilities needed these days but without the access to flexible credit.
Some accounts can actually work with you to help you manage your money and rebuild credit rating by providing an optional money management / budgeting service and can automatically set aside part of your income to ensure bills and payments are kept up to date.
As previously mentioned, these kind of bank accounts will still provide you with a debit card, cash card and all the usual banking facilities … minus the credit facility.
Apart from the specialist bad credit bank accounts also look out for the “basic bank accounts” that are available at many of the high street banks but are not publicised. The reason they don’t get much of a mention is that, although the banks are obliged to offer them, they are not commercially attractive to them. If you’re looking for a bad credit bank account it may be well worth trying your high street bank and asking if they provide a basic bank account … ask for it by name.
The vast majority of people are eligible to open these basic bank accounts – credit rating doesn’t come into it so CCJs, defaults, debt problems, serious credit issues, even bankruptcy does not represent a problem. The only way an application will be rejected is if the applicant has been convicted of a fraud related criminal offence or if identity cannot be confirmed.
Again, with these basic bank accounts for bad credit there’ll be no access to credit or overdraft but you will be able to set up DDs, have payments made directly into the account and get a debit card which will also act as a cash card.
With regard to cost – most basic bank accounts are free whereas a specialist bad credit bank account will usually come at a small monthly cost but provide more available facilities so shop around and find the right bad credit bank account for you.
Just as a bank account is essential so is some form of plastic credit card, debit card or pre-paid card. An actual credit card can be a useful tool when rebuilding a damaged credit rating, sure, credit limits may be low and interest rates higher than a standard card but there are specific companies providing credit cards for bad credit which, if used correctly can be a benefit.