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Bank accounts for bad credit

Guide to opening a current account if you have a poor credit rating

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A bad credit score doesn’t have to stop you from opening a bank account to help you manage your finances

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Having a poor credit score doesn’t mean that you should write off your chances of finding a safe place to store your money.

While banks may not offer you a current account with an overdraft facility, you may still have other options, including basic bank accounts, prepaid accounts and credit union accounts.

But they may not be widely advertised, and as it can be difficult to understand exactly how your own financial situation will be viewed by a bank, you could be forgiven for being a little confused as to what steps to take.

Our guide is here to help, by answering your questions, so you can find a bank account that is right for you.

Can I get a current account with bad credit?

If you have bad credit you should still be able to open a current account, but it may only be a no-frills basic bank account that won’t provide an overdraft.

They are designed for people with poor credit scores to provide a place to safely pay in, store and access their money.

As long as you have a form of ID, the option of a basic bank account should be available to you.

What does it mean to have bad credit?

Having bad credit means a bank sees you as more of a risk to lend money to – that includes allowing you to open a current account with an overdraft.

Your credit score is created from information held in your credit file that shows your history of borrowing and repayments.

If you have been turned down for a loan or credit card, the interest rate you’re offered is higher than you expected, or you are unable to borrow as much as you would like, it may be because you have a bad credit rating.

You can view your credit report for free and find ways to improve your credit score with our Credit Monitor service.

Will a bank do a credit check if I want to open a current account?

Yes, and if you have a bad credit score you may not be able to open a regular current account with an overdraft facility.

If so, you may need to look for a different option, such as a basic bank account. 

What do basic bank accounts provide?

Basic accounts, also known as bad credit bank accounts, allow you to store, deposit, and withdraw money while avoiding certain checks associated with regular current accounts.

Here are a few reasons you may want to consider opening a basic bank account:

  • You won’t have to undergo a credit check
  • You’ll only need to provide a form of identification to set up your account
  • You’ll be provided with a debit card to use in-store and online
  • Opening a basic bank account is usually free
  • You can pay in your income and deposit cash and cheques
  • You can withdraw cash over the counter or from a cash machine
  • You can set up direct debits and standing orders
  • You can receive balance checks either in-branch, at a cash machine, online or via your phone
  • You can build your credit rating by showing you can handle money responsibly

However, there are a few things restrictions you should consider:

  • You won’t have access to an overdraft
  • You’re unlikely to be paid interest on your balance
  • You may not be given a chequebook

How do I open a basic bank account?

Many basic bank accounts do not offer online applications and need to be opened in a branch. You will be required to fill in an application form and show some ID and proof of address.

A current passport, driving licence or EU identity card will usually do for ID, but banks publish their own lists of requirements so check these before you make your trip.

If you can't provide any of the accepted forms of ID, then contact the bank in advance and they may be able to suggest alternative ID you can present.

What alternatives to a basic bank account are there?

If you do not wish to open a basic bank account and have a poor credit history, there are a few options open to you, such as:

A credit union account

Credit unions are non-profit financial organisations set up to benefit a community where the members tend to have something in common, such as living nearby or working in the same industry.

A few credit unions offer bank accounts to those with a poor credit rating, but there may be a monthly fee – and you may have to commit to retaining a specified minimum balance in the account.

On the plus side, they may also provide the option of cashback in certain stores to offset the fee and allow you to take out small loans. As a member, you can also attend meetings and be involved in the decision-making processes.

You will usually need a connection with an existing member of the union to be eligible to apply.

Post Office card accounts

A Post Office card account provides you with a card that you can pay your benefits, pension and/or tax credits onto.

You can withdraw money until the balance of the benefits you’re receiving runs out – much like a prepaid card, but you won’t be able to set up direct debits or have access to an overdraft.

You’ll need to ask the governmental body that is paying you to set the account up on your behalf. You’ll also need to:

  • Be in receipt of certain government benefits, pension or tax credits
  • Provide ID such as a driver’s licence or passport
  • Provide a proof of address such as a bank statement or utility bill

Prepaid bank accounts

These are debit-card-based accounts that act like a bank by allowing you to pay in income and your bills by direct debit.

While they don’t run a credit check, they often charge monthly fees, cash withdrawal fees and even fees for standing orders or direct debits.

Prepaid accounts can be topped up at pay points, post offices and via BACS.

How do I improve my credit rating?

If you have a poor credit rating, there are a number of ways you can improve it, such as:

  • Repaying some of your loans and debts
  • Registering on the electoral roll
  • Trying not to miss repayments by setting up direct debits
  • Updating your address on all your accounts
  • Making sure you are not still financially linked to an ex-partner or housemate
  • Avoiding applying for more financial products than you really need
  • Closing any credit accounts you no longer use

You can also take control of your credit score with our Credit Monitor that allows you to check your credit report and get free personalised tips on how to improve it.

For more ways to improve your credit score, read our guide.