Why do banks run a credit check for checking accounts?

Factual Questions
1

I am looking at several online banks and they all want to run a hard credit check. Why?

I’m not trying to borrow money. I’m trying to open a checking account. Why the need for a credit check?

2

  1. To be sure you’re not the kind of deadbeat who frequently bounces checks.

  2. To see if you’d qualify for overdraft protection.

3

Thanks for the response, but…

  1. I’ve pulled many credit reports and see nothing there regarding bounced checks.
  2. I didn’t apply for any overdraft protection. Just a checking account…
4

They’ll run you through Chexsystems to determine whether you’ve bounced any checks. They’re running your credit report to verify your identity and to identify any loans you have that they can try and convince you to refinance.

5

Bounced checks aren’t reported on your credit report. As MOIDALIZE points out, that’s what ChexSystems is for. They want to know if you’re a deadbeat in general before giving you an account.

Of course. How in the world will they know whether they want to sell you overdraft protection without knowing your creditworthiness?

6

I’d guess it was for a credit card. For some reason, my bank thinks I can’t live without one of their credit cards.

7

So why do they have to make a hard pull? Isn’t a soft pull good enough? At least that won’t lower your score.

8

They’re pulling your credit due to a request on your part to conduct business with them.
That’s a hard pull. If they don’t flag it as a hard pull, then they’re lying to the credit reporting agencies.
A soft pull is only to be used for account review and promotional offers.

You walk up to the bank and wish to engage in commerce: it’s a hard pull. If they later check to see if they wish to continue engaging in commerce: it’s a soft pull.
They walk up to you and want to engage in commerce: it’s a non-consensual soft pull.

9

In addition to the aforementioned reasons, they use the credit report to establish your identity, period.

10

Previously closed checking accounts with unpaid balances also show up as collection accounts on your credit report. They want to make sure you didn’t overdraw your last account by $1000 and walk away from it.

11

Here is your main reason.

12

The company they use specifically records information about banking related issues. Its is called Chex-Systems (https://www.consumerdebit.com/consumerinfo/us/en/index.htm). It has additional information about you to the “big three” credit agencies. They deliberately keep a very low profile and your bank will not tell you about them until they decline an application because of them (when I had my ID stolen I had bogus info in their database, but didn’t know about it for years until I tried to open a new checking account.

13

FYI, Chexsystems IS a credit reporting agency per the FCRA and you ARE allowed to dispute tradelines on there.

14

Yes, indeed. And they have to give you a copy of your report if you’ve been a victim of ID theft (or had an application turned down because of them). However they go to great lengths to make sure you don’t even know about them. You’ll notice even their website goes to great lengths to look like a genetic consumer advice website, rather than a website of a credit reporting agency. I had absolutely no idea they existed when I had my ID stolen.

15

I wonder how often they actually receive complaints?
You can technically dispute any tradeline where ANYTHING is inaccurate, even down to a single day in the opening of the account.
I’m curious how many people actually bother.
I might just find a couple of slightly inaccurate items on my Chexsystems report and dispute them for kicks… and so I could post the response letters online as a novelty.

16

I think it takes several hard pulls to lower your score, the amount it is reduced is very small, and it drops off fairly rapidly. Unless you were just about to refi your mortgage, where a 1/4 of % could be significant, a tiny short time reduction should make no difference.

17

I read extensively on this a few years back, including boards where folks were pulling their scores every single day and noting changes as their behaviors changed.
In some cases more pulls helped (usually people with zero pulls listed).
In some cases pulls hurt a little (people with bad or mediocre credit).
In some cases pulls hurt a LOT (people with great credit; 750+ folks). Of course, those folks might lose 40 points to a hard pull, but most stuff you can finance with an 800 you can finance with a 760.