How to get a bank account with bad credit

Opening a bank account usually requires a credit check and each bank will have its own requirements as to the types of customers and credit profiles that they will accept. If you have serious defaults, CCJs or have been bankrupt, then you may find it harder to be accepted for a standard bank account. Basic bank accounts are available from a number of UK banks and usually only require a credit check in order to identify you.

Another alternative is guaranteed bank accounts, which are card-based accounts that offer banking services. They too are more lenient on accepting those with lower credit scores compared to a standard bank account. Guaranteed bank accounts are available from fintech companies and not banks. They are regulated by the Financial Conduct Authority (FCA) and have to operate to UK regulations, but if they fail, they are not covered by the Financial Services Compensation Scheme (FSCS) and this might place your money at risk or delay you being able to access it.

If you don’t want to go to a bank or be left alone online or with an app with a guaranteed bank account, then some credit unions offer guaranteed bank accounts with branch or telephone support.

If you have a poor credit score and need to open a bank account or switch your bank account, then your main options are either a basic bank account or a guaranteed bank account. Choosing which one will depend on how you want to use your bank account, for example those needing to bank with a local branch can do this with a basic bank account from a high street bank but not with a guaranteed bank account. A big factor is if you want to pay any fees for your banking services, as basic bank accounts come with little or no fees while guaranteed bank accounts can charge for certain transactions and have a monthly fee.

There are approximately 1.3 million adults in the UK that do not have a bank account, according to the Financial Conduct Authority. Many of these are worried about being accepted for a bank account due to their credit score. Guaranteed and basic bank accounts have been designed to help those with poor credit scores and provide them with a range of banking services. 

A basic bank account is designed specifically to help those that find it hard to open a standard bank account, for example if they have had previous credit problems or a low credit rating. Basic bank accounts do not require a credit check, other than for proving your identity. They are available from 15 UK banks and are a cheap way to get banking services.

A basic bank account is very simple and allows you to have money paid in from your benefits and/or wages, pay bills with direct debits and standing orders and the use of a contactless debit card. However, it is not possible to get an arranged overdraft with a basic bank account. Most importantly, they have no fees to open or operate the account and many also do not charge fees for refused payments.

A basic bank account only requires a soft credit check in order to help the bank check your identity.

A basic bank account does not charge you to operate your account or for services such as direct debits or standing orders. Many also do not charge for failed payments, but you do need to still manage your account carefully as it is possible the bank could close it if they believed it was being misused. 

Because the bank is not charging you fees to operate this account, they also don’t offer any interest on your balances. However, if you are starting to save money for an emergency fund or a rainy day, you can open a savings account instead and earn interest on your money.

Basic bank accounts do not offer arranged overdrafts as their aim is to help you sort your finances rather than adding to any debts. If you find you have got your budgeting wrong one month and a set payment from your account will make you overdrawn, some basic bank accounts will allow this to happen and include a fee-free grace period for you to return your account back into credit. 

A basic bank account can also help young people that may not yet have a credit history and need the services offered by a bank account. Basic bank accounts are available to those over the age of 18 irrespective of whether they have a good or bad credit score. 

The largest nine bank account providers are obliged under The Payment Accounts Regulations 2015 to offer basic bank accounts that are free for day-to-day operations. Currently, there are 15 banks offering basic bank accounts.

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A guaranteed bank account does not require a credit check and if you can prove your identity, opening an account is guaranteed. All guaranteed bank accounts include a payment card (either a debit card or a pre-paid card) and nearly all offer direct debits and standing orders. They usually come with an app to help you manage your account and day-to-day spending. Most guaranteed bank accounts do not offer an arranged overdraft and will not allow you to accidentally go overdrawn.

• Guaranteed bank accounts have different fees

Guaranteed bank accounts generally charge management and transaction fees, while basic bank accounts do not.

• Your money is protected differently using a guaranteed bank account