Bad Credit Mistake, Good Person

December 5, 2006 1:35 PM

I have a question about resolving an issue with my credit that is keeping me from opening a new bank account. I was overdrawn at Washington Mutual in California. The amount is around seven hundred dollars. It went to a credit agency a while ago and now shows up on my credit report. I have moved to Pennsylvania and when I went to open a new bank account, surprise surprise was not allowed to. The bank employee told me that what I needed to do is call the credit company and tell them that I will pay the full amount, (which I want to do, and thankfully, can now), if I get them to agree to send a written confirmation that I have made good on my debt and that the matter has been resolved. He said that is the only way that I will ever get to open an account at any bank. A few weeks ago, I went through metafilter with a fine tooth comb to find advice on how to go about this, but didnt find the answers I need.

These are two of the more helpful threads about credit issues that I found.
http://ask.metafilter.com/mefi/49726

http://ask.metafilter.com/mefi/34048

I went to the websites suggested by the metafilter community but didn't come out any wiser. Basically, I dont want to screw this up and do even more damage to my credit. How do I get the creditors to agree to send a statement before I make a payment. What exactly should I ask them to state? What would be ideal, and what is realistic to expect? How do I avoid paying the money and not getting any letter, or getting a letter that the bank wont find satisfactory enough to let me open an account? Help! Signing over paychecks to my mom to cash is getting old.

posted by mammamia to work & money (17 comments total)

Oh my gosh, I am so sorry that I messed up the format of my question by putting too much info in the first part. How embarassing. Sorry!
posted by mammamia at 1:39 PM on December 5, 2006

Pay them with something traceable (maybe you can give your mom cash and have her write a check?), send it to them in a certified letter, and photocopy it all before it goes out. With the money, request a receipt or a letter acknowledging that you've paid.

Then even if they don't respond you can send that off to the credit reporting agencies and show it to the bank.
posted by routergirl at 1:41 PM on December 5, 2006

If you "mishandle" or overdraw an account and it's closed under FDIC regulations, then the bad account information will end up with Chex Systems (a credit-like agency that banks use for previous consumer history). Here is some information on them. You can google all sorts of horror stories on chexsystems (like not being able to have a checking account for seven years because of a $100 overdraft). Youi need to speak to a banker at a small bank or credit union. Sit down with them, explain your credit past (they have heard worse) and then try to open a savings account first. Most bank managers have the authority to override the Chex Systems recommendation, but they are not going to advertise that fact to you.
posted by mattbucher at 2:13 PM on December 5, 2006

Any bankers out there?
posted by mattbucher at 2:19 PM on December 5, 2006

I work for a large bank and directly with ChexSystems. mattbucher is right, your debt has been reported to ChexSystems. A ChexSystems record stays on your profile for five years, even if you pay the debt. Once you pay the debt with WaMu, they will update Chex to indicate that your account has been paid in full. It's a common procedure and they just do this automatically, but if not, a simple request from you should be all it takes. If you deal with the collection agency instead of WaMu directly, it might be a different story -- I'm not sure about what verification they provide you. But however you chose to pay, you should be able to get a letter from a banker or Collections officer with WaMu indicating that your account debt has been paid and they are updating your Chex record. It'll basically just be a form letter - WaMu deals with this all time and I can't imagine any bank would make it difficult to get this letter.

Mind you, your Chex record will not be deleted, just removed. For some banks though, this will be enough to let you open an account, although it may have limited services. For example, at the bank I work for, you wouldn't be able to get a Check Card with your account, just an ATM card.

More and more banks are willing to open account for people with Chex records because it turns out they aren't as much of a risk as previously thought - most people have 'learned their lesson' or whatnot. Smaller banks and credit unions are even more likely to approve a new account. Even at larger banks though, the branch manager almost always has the option of overriding the negative record.
posted by logic vs love at 2:38 PM on December 5, 2006

Can you get an assurance from Wamu that if you pay the debt in full they will remove the report from ChexSystems, not just mark it paid?
posted by grouse at 3:02 PM on December 5, 2006

In general, banks will only remove the record if it was reported due to a bank error. It's a huge compliance violation to remove it for any other reason, although it's happened and, if you make a big enough stink about it, you might get lucky. WaMu might be more (or perhaps lass) lenient with that since they seem to like reporting people more than most banks do. But really, the record is supposed stay regardless of whether the debt it paid.
posted by logic vs love at 3:18 PM on December 5, 2006

I keep finding web sites that will let you pay for a list of banks that don't use ChexSystems. Looks scammy.
posted by grouse at 3:32 PM on December 5, 2006

Thanks so much everyone for taking the time to answer, of course, Im going to wait a few more days to see if there is any more advice before proceeding, but I feel a lot better educated now. Thanks!
posted by mammamia at 3:36 PM on December 5, 2006

This happened to me too, with WaMu.

Go take the 3 hour Get Checking class. After taking the class, you will get a certificate that will let you open a checking account at a participating bank.

I have no idea where in PA you are, but the class is offered by the Consumer Credit Counseling Service of Delaware Valley in Philadelphia.
posted by darkness at 3:55 PM on December 5, 2006

Taking grouse's lead, I found this list [via] of banks that don't use ChexSystems to verify your information, but they include WaMu and that just... doesn't make sense, so who knows?
posted by logic vs love at 3:56 PM on December 5, 2006

As pointed out above, more and more banks are offering (limited) accounts to people on Chex. For example, Key Bank has Checkless Access Account. Some such accounts are available to only certain regions (I think Wells Fargo has a checkless account for people in TX).

The cash advance / check cashing industry is booming (I'm sure you've noticed a billion such stores in your area) and traditional banks want in on that action.
posted by gluechunk at 4:14 PM on December 5, 2006

Wait a minute... isn't there a difference between Chexsystems and a credit agency? I always understood that the first kept track of people who wrote bad checks while the latter kept tabs on debtors of all types and attempted to collect payments from them.

When I went to open a checking account a few years ago, I was appalled to discover that I couldn't do so until the bank ran a credit check on me. That means, of course, that they would check with the credit agencies to see whether I owed anyone money. I didn't, but as far as I was concerned, credit agencies and credit checks were at best a necessary evil and were only to come into play when one was borrowing money. I didn't feel the bank ought to be doing a credit check on me. So I found one that didn't have this requirement. They're a regional chain and don't offer all the services that a larger bank does, but I'm happy with them for now.

As others have said, I doubt you'll find a reputable bank that doesn't use chexsytems, but it's possible that chexsystems isn't your problem. (Though if you were overdrawn on an account and haven't paid the money back, I'd be kind of surprised if you weren't on their "naughty" list). It could be your problem is that the bank is running a credit check. It might be possible to find a bank that won't require this.
posted by Clay201 at 4:43 PM on December 5, 2006

I second the credit union, good chance they won't check (even big ones like Ford's) and they're so much nicer to deal with then banks.

Then pay WaMu off
posted by Mick at 5:25 PM on December 5, 2006

It depends on the credit union. The CU that I have treats me like complete shit. They refuse to give me a check card because I don't have spotless credit, and they definitely used ChexSystems.

Personally, I think that ChexSystems should be obliterated and forced out of business.

In my experiences, WaMu is actually easy to deal with. If you have the money, go into a branch and talk with a manager and see if they'll let you open a savings account with direct deposit if you pay the amount in full.

You should not have to deal with a collection agency at all. Call WaMu and ask to speak to someone in loss prevention. Do it from inside of a branch, with the $700 in hand. I think you'll find them to be very reasonable.
posted by drstein at 9:38 PM on December 5, 2006

Clay201: "As others have said, I doubt you'll find a reputable bank that doesn't use chexsytems, but it's possible that chexsystems isn't your problem."

It's less confusing to the asker if answerers read the other answers, like this one, before posting.
posted by Mr. Gunn at 11:36 AM on December 6, 2006

Mr. Gunn,

I read it. While it provided useful information, it did not deal with the question of whether the bank was running a credit check in addition to a chexsystems check. My post did.
posted by Clay201 at 7:02 PM on December 7, 2006