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You will be able to open a standard checking or savings account with bad credit as long as you have the minimum cash required to maintain the account. This minimum varies from bank-to-bank, and typically must be maintained at all times to avoid a fee. However, if you are looking to open a credit-based account, your credit score will matter. Many banks offer credit cards and revolving accounts, but your ability to attain one of these accounts will be hindered by bad credit. In the least, it will be more expensive for you than an individual with good credit.
Factors Affected by Your Credit?
The two primary factors affected by your bad credit are your interest rate and your limits. Your interest rate, or APR, will go up as your credit goes down. One option to keep rates low is to seek a secured credit line against an asset. Using unsecured personal loans with bad credit will lead to much higher rates. Unsecured loans are riskier for the lender. Traditional banks will not typically extend unsecured personal loans to people with bad credit, and you may need to seek a high risk lender if you intend on taking this path.
Your limits will also be lower if you have bad credit. Limits determine the total amount of credit available to you at any given time. Since a credit card is a revolving line of credit you can choose how much to use each day or month. As long as you pay the minimum fees, you can also choose when and if to pay down your balance.
What Happens If Your Credit Changes?
Your credit will fluctuate up and down while you have a credit account open. You can expect to see your interest rates go up if your credit drops significantly. The bank has an obligation to notify you if this occurs. The bank is also prohibited from raising the interest rates on existing credit by new legislation introduced in 2009.
If your credit score improves, you can ask the bank to raise your limits. Many banks have a limit increase request immediately accessible through online banking. Banks are happy to extend credit to those who are financially stable because they profit when you use your credit card.
Which Banks Are Best for Bad Credit?
There are really no "bad credit banks" that work exclusively with individuals with bad credit. Banks try to diversify their risk by accepting people across financial classes with varying levels of financial stability and interest rates. As a result, it may be best to seek a larger bank if you have bad credit. These banks are more able to take on your risk because they can locate other, more stable borrowers as well. Small banks often have time taking on additional risk.
The exception to this rule is high-risk personal lenders. These companies work largely with high-risk accounts in order to charge more in interest rates and fees. If you intend on working with a high-risk lender, protect your financial safety at all times by reviewing contracts closely and making decisions based on your long-term financial health.
