Pulling credit reports for savings accounts... why?

March 16, 2008 7:38 PM

You'd think banks would want you to throw money at them, but alas. Why do online banks pull credit reports just to open a savings account, and do any banks just want your deposits regardless of your history?

I've been questing for one of those 3.5% or more accounts with the many banks now offering complete branch-free access. While my credit rating is quite meh, it's in repair, I own my home, am never late on car payments, have a full time job, etc. But each time I apply I get declined. In pulling my report, I see no glaring red flags other than what's obvious to me. I know they will pull minor details off of your report to verify identity and such, but why the full monty?

Could anyone point me to a bank that has a reasonable (or better) interest rate that will not pull a report? Also, help me understand the theory behind this. I'm not going to be writing checks off of this account, natch, nor is there any loaning or risk for the bank involved (not that I can think of). Why does a bank then screen for credit worthiness if they're just going to be recycling your own greenbacks with a little interest kicked in?
Thanks in advance, as always.

posted by moonbird to Work & Money (9 answers total)

This is more likely a Chexsystems issue, and not a credit report issue. Chexsystems is a company to which most banks report ATM fraud, NSF, and unpaid overdrafts, among other things. There's likely something in your history that you need to resolve somewhere. There's a website with information about banks that don't report to Chexsystems or pull Checksystems reports for new accounts by state:

http://www.chexsystemsvictims.com/AboutmyList.html
posted by tosteka at 7:51 PM on March 16, 2008 [1 favorite]

I've never heard of a bank pulling a credit report for a savings account. I know that it's somewhat common practice for some banks to do it when you open a checking account. I use a credit union for most of my banking and they don't pull reports to open accounts at all.

For an online, high yield checking account I use eTrade. The Complete Savings has no minimum balance requirement and right now the APY is 4.10% for balances under 50k. You can link it to external accounts in order to transfer money back and forth easily. I've been with them for a year or so and I'm pretty happy with them.

I don't believe that eTrade pulls a credit report to open their Complete Savings account. I have relatively medicore credit and I don't recall ever reading in my disclosures that they would do so.
posted by howrobotsaremade at 7:51 PM on March 16, 2008 [1 favorite]

Response by poster: howrobotsaremade: I use Etrade for my brokerage account, and that's where this whole thing began (wanted to add a savings account to tuck away my earnings). When I was declined I was flabbergasted, obviously. But tosteka brought up this Chexsystems thing, which was given by Etrade and several other banks as the reporting agency for the information. So both of you combined are giving me some good leads on this. Thanks!
posted by moonbird at 7:56 PM on March 16, 2008

Chexsystems is a little different than a credit bureau report. Like tosteka said, they keep track of banking transactions, but not actual credit accounts that you have. Although I think you can contact them and ask them if there are outstanding unpaid checks somewhere in their system

I have outstanding medical collections accounts that I am slowly paying down on my credit report from a car accident I was in a few years ago. I have not had a problem opening any kind of bank account since then. Like I said, my credit union doesn't run a credit report and I think that if it was an issue with those accounts that eTrade would have denied me as well. However, I haven't bounced a check in years so I can see where maybe something in Chexsystems' database might be an issue.

You could check with Chexsystems and see how you can clear up whatever issue there is floating around out there and after that you should be ok. It could be an error and in that case you can file a dispute to have it removed as well.

Good luck though. I know how frustrating it can be to try to clear up a messy past financial history. It has taken me years to get out from under some of my past credit snafus.
posted by howrobotsaremade at 8:06 PM on March 16, 2008

For an online, high yield checking account I use eTrade. The Complete Savings has no minimum balance requirement and right now the APY is 4.10% for balances under 50k.

Actually they just dropped it to 3.45% They also have a checking account with 3.25% APY and they'll refund all ATM fees (which is probably a better deal for most people)
posted by delmoi at 8:10 PM on March 16, 2008

Sorry about that... actually just looking at my Feb. statement I see that it dropped to 4.01 and I misread that (it was a bit higher when I opened it but had been hanging around 4.10 recently).

I wouldn't have probably noticed the next drop until my March statement came out. So I apologize for the misinformation.
posted by howrobotsaremade at 8:17 PM on March 16, 2008

Most banks do pull your credit at least the first time you open an account with them. I assume this is primarily to verify your identity, but I would not be surprised to find out that a poor credit history might disqualify you for various types of accounts. Some banks only do what is called a "soft inquiry," which does not affect your credit score, but others do the "hard inquiry," which will drop your credit score by a few points for some months.

FNBO Direct is known to do "soft pulls" and I have heard that they do this only to verify your identity, so they might be worth a try. I have one of their accounts. It's not the best interest rate (right now, that would be Countrywide), but it's up there.

Alternatively, if you have any relationship with a bank that offers a high-yield savings account (e.g. Citibank), you might try them, as they may bypass the credit check for existing customers.
posted by kindall at 9:07 PM on March 16, 2008

Have you ever screwed a bank before? (unpaid overdrawn accounts, etc.) My understanding is that banks care more about your banking history than your credit history.
posted by Jacqueline at 1:36 AM on March 17, 2008

Having worked on the back end for at least one popular online bank in the UK, I know that sometimes, the systems just aren't clever enough to distinguish between when they may and may not need to pull your credit report and therefore just go ahead and do it anyway. (Disclaimer: this may not still be the case today).

Partial justification for this was that, once you got your "foot in the door", they wanted to make it easy for you to add other products... and therefore they want to know everything about you before taking you on as a potential customer. I would imagine that most savings accounts aren't particularly lucrative for banks and they would much rather be charging you a bunch of interest on a mortgage or credit card instead.
posted by jon4009 at 3:30 AM on March 17, 2008