Roadmap to Building Credit

Unfortunately, in life sometimes things just do not work out as we planned. Now more than ever, most people are encountering unforeseen challenges in their day-to-day lives.  This can be especially true when it comes to money issues and finances. While most people are filled with good intentions, we sometimes cannot fulfill promised financial obligations, which causes us to have negative marks on our credit reports, resulting in a low credit score. Once our credit score reaches an unacceptable level, it is often difficult to obtain the necessary credit needed to get the things we need and want in life.

Thankfully, some financial institutions understand that bad things sometimes happen to good people, so they have come up with some creative ways for people to bounce back once they have had some credit and banking issues. Those who have had past banking problems and want to establish a better financial situation for themselves should search for a local bank or credit union that offers a second-chance checking account when they are finding it difficult to get the approval needed for a standard checking account.

If you have had a bout of credit issues, you probably understand the variety of problems that can be created by previous banking errors. If so, good for you for looking for savvy ways on how to build credit and tips to correct those mistakes. For anyone looking to achieve long-term financial success, it is extremely important to remember that this is a journey. There may not be an overnight fix, but there are certain steps you can take today that will steer you in the right direction to establish credit-worthiness.  A second chance checking account might be just the solution you are looking for to prove that you are trustworthy enough to manage your own bank account and that you are willing to make an effort to create a better financial reputation.

Here is some helpful information about how to build credit and improve your rating to show that you are financially worthy so you can get back on the right track to a bright financial future. In addition, we've listed some facts about second-chance checking accounts from Finex Credit Union, to help you learn more about how to manage your finances even if you have made mistakes in the past.

Table of Contents:

What is a Second Chance Checking Account?

A second chance checking account is a special type of bank account that is offered by some banks and credit unions to help people who may have had banking issues in the past. For those who have had things like unpaid overdraft fees, insufficient fund issues, and other common banking mistakes with previous bank accounts, it can be difficult to obtain approval to open a new checking account. It is often better to look at smaller, local banks or credit unions when it's time to open a second chance checking account, as many of the larger, national banks do not offer these types of accounts. Most of the time,  these smaller community banks and credit unions have the ability to work with customers better and can offer more banking services than the larger financial institutions.  Finding a credit union like Finex Credit Union that can assist you in opening a second chance bank account now and maintaining it properly may provide the opportunity you need to restore your financial credibility so that you are able to open a regular checking account in the future.

Be sure to review our “Finding the Right Second Chance Banking Options for You” blog to get an even better understanding of all the Second Chance Banking options available to anyone looking for a fresh start.

What Might Lead People to Apply for a Second Chance Bank Account

People who would benefit most from a second chance checking account at a local credit union or bank include those that have financial hardships that may have caused them to improperly manage their finances. There are many real-life circumstances that are often unavoidable that sometimes lead to less-than-ideal financial choices.  Here are some of the reasons people might apply for a second chance bank account at their local credit union:

Reasons to Apply for a Second Chance Bank Account

• Unforeseen medical bills
• Divorce, death, or other life-changing events
• Poor money and budget management
• Loss of employment or decrease in wages
• Money mistakes in your youth

If you have any of the following negative marks against your past bank checking accounts, second-chance banking may be a great alternative for you.

• Account overdrafts
• Delinquent or unpaid negative balances
• Involuntarily closed accounts
• Fraud-type activities
  

Be sure to check out our “5 Reasons A Second Chance Bank Account Is a Good Fit For You” blog to get more detailed information about the circumstances that may lead to second chance banking. 

A Few Features You Will Want to Look Out for When Shopping for a New Checking Account

While some checking accounts for those with credit issues may offer features and perks of standard checking accounts like direct deposit and debit cards, they often have restrictions on writing checks or online banking options. These accounts may also have excessive monthly fees. While it may not be fun to have to deal with these account restrictions, a second-chance bank account can help show financial institutions that you can be a responsible customer.  

These special types of bank accounts for those with past banking issues are different from typical checking accounts, so be sure to familiarize yourself with the features so you know about the various types of fees or restrictions of second chance bank accounts. Here are some of the features you should know about second-chance checking accounts before choosing an account.

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Second Chance Checking Account Features

• Overdraft Protection – Most second-chance bank accounts have restrictions that limit spending to the funds that you have available, which protects you from over-drafting the account and making your credit worse.
• Account Fees – Be prepared for typical monthly maintenance fees like with standard checking accounts. In addition, check for additional fees for things like purchases, account inactivity, deposits, and more, which can really add up.
• Minimum Balance Requirement – Many second-chance checking accounts require that you make a minimum deposit to open the account in addition to a set amount you have to keep in the bank account in order to avoid fees.
• Check Writing Privileges – Some second chance accounts do not offer check writing privileges to account holders. If so, they may charge a fee for each check written or limit the number of checks you can write on the account.
• Online Banking – If online banking is important to you, be sure to check that your financial institution allows this feature with second-chance checking accounts, as this option may not be available with your account or may have additional associated fees.

Once you responsibly maintain a second chance bank account for several months, most banks and credit unions will allow you the option to convert your second chance checking account to a standard checking account, so showing that you are responsible and have built better banking habits can reward you with a well-deserved account status upgrade.

Finding the Right Second-Chance Banking Options for You

When you realize that you need a second chance at managing your checking account, it is the perfect time to search for the right second-chance banking options for you. It is important to find a program that works well for your situation and teaches you how to better handle your finances and create good money-managing habits.  Second-chance checking accounts like the ones offered to members of Finex Credit Union are for those who have past bank account issues that are making it almost impossible to open a checking account now. These types of checking accounts allow members to start to build a new history of responsible money management, even if you have a negative record on Chex Systems due to an unpaid closure or NSF activity.  

Not only will you be able to open a checking account to use to secure your money, but you will also get financial education guidance to achieve financial success. This will get you on the right path to creditworthiness and teach you how to properly manage finances and how to build credit over time

Check out our “Second Chance Checking Account Most Commonly Asked Questions” guide and make sure you have the answers to these questions before getting started on your credit rebuilding journey.

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How Second Chance Banking Can Help Rebuild Your Creditworthiness

Second-chance checking accounts are an amazing opportunity to help you rebuild your creditworthiness by giving you the chance to make good credit and banking choices that will eventually lead you to get a standard account. These types of “low-risk” accounts are set up to allow you another chance to prove that you can properly manage your finances by setting limits and having built-in restrictions to help prevent account holders from spending money they do not have. Limited functions of these accounts are put in place to help you be successful and create good financial habits. Products like prepaid debit cards, no overdraft accounts, and other precautions are there to help you better manage your money and avoid overdraft banking issues. With some time, a second chance checking account will help you learn the concept of responsible banking and repair your banking history from mistakes in the past.

Use our guide, “How to Find the Best Online Checking Account [10 Factors to Consider]” to make sure the second-chance checking account you choose to open is the best option for you.

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Exactly How Long Does It Take to Build Credit?

Learning more about how to build credit includes knowing that a good credit score has to be earned and that it does take some time to build a good reputation of creditworthiness. It typically takes having an open and active credit account for three to six months before an initial credit score can even be determined. Establishing a solid credit history can be built successfully over the years with good money management skills. There are some things you can do, however, to quickly increase your credit score if you need to rebuild your credit and improve your rating with the national reporting bureaus faster.

If you are looking to build or rebuild your credit, be sure to read our blog, “Exactly How Long Does it Take to Build Credit?” to fully understand the timelines and set your expectations for your fresh start.

How to Build Credit in a Few Simple Steps

Building credit does not have to be a complicated issue at all and can be accomplished in a few simple steps. If you need to learn more about how to build credit or improve your current credit score, your bank or credit union offers solutions to help. From secured credit cards to secured loans that can help to boost your rating – there are many ways to build credit and improve your financial status. 

Check out our “How to Increase Your Credit Score in 30 Days or Less” blog with helpful information to quickly raise your credit score and other good financial advice for those who want to learn more about responsible money habits.

First 3 Steps to Take Today to Build Credit Responsibly

Proven credit responsibility is the key to your financial future. In order to have the buying power you want and need to purchase homes, cars, and other important things in your life, a good credit score is crucial. In order to prove that you are ready and know how to build credit and show lenders that you are creditworthy, here are the first things you need to do.

3 Steps to Build Credit Responsibility

• 1st Step - Get a Job – While having a job does not directly affect your credit score, being employed full-time does mean a steady source of income to meet your financial obligations, which is a major key in building credit. If you do not have the income to pay your bills, you will not be able to effectively build credit responsibly.
• 2nd Step – Pay Your Bills on Time – The key to building credit is paying your bills on time each and every month. A history of on-time bill payments is crucial for building credit responsibility and earning a good credit score. Be sure to pay all of your bills and credit obligations on time – even those that are not listed on your credit report - for the best results and reputation.
• 3rd Step – Open Accounts to Build Credit – In order to build credit, you must have accounts in your name that prove creditworthiness. Getting a secure credit card or applying at your local credit union for a small secured loan are great choices. Once your credit accounts are established, be sure to be responsible and pay on time, because your credit building begins as soon as your bank or creditor reports the payment history to the major credit bureaus. The monthly reporting of your on-time payments is how your credit report and good credit history are created.

At Finex Second Chance Banking and Proving Creditworthiness Go Hand in Hand

Second-chance banking tools are a great way to prove creditworthiness and begin to build a better financial history. Your credit history will get stronger the longer your credit accounts are open and are paid on time. Taking steps now to build credit as well as showing that you are financially responsible is the main way for you to have the financial freedom and success you deserve. At Finex, we believe that everyone deserves a second chance and we look forward to seeing our members succeed. We always want our members to feel supported and offer judgment-free support so our members feel empowered to make better choices, knowing your credit union has your back.  Establishing a second chance checking account with Finex Credit Union is a great way to start rebuilding your financial reputation. Contact us today to learn more.