Current accounts for people with bad credit

Having a poor credit score can be a bumpy ride, but opening a new bank account doesn't need to be overcomplicated.

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Perhaps you’ve entered an IVA (individual voluntary arrangement) or have missed payments in the past and now you’re trying to get back on track. Getting yourself a new current account can become unnecessarily complex, but only if you don’t know where to look.

We did some research and found how you can open a bank account without being credit-checked, so that even if your credit score is poor, it doesn’t turn into a stressful experience.

How to open a current account if you have bad credit

The main reason why you are credit-checked when applying for current accounts is that most will come with an overdraft facility. If you want to avoid a credit check at all costs because you think you may be refused, you have two main options:

  • Challenger banks. Most digital-only banks allow you to open a full current account directly from their app. You’ll have to prove your identity, but they won’t check your credit score.
  • Basic accounts. Most traditional banks offer them, although they aren’t heavily advertised. They are full UK bank accounts, but they’re missing some features (namely, you guessed it, an overdraft).

They’re both suitable options, but depending on your banking style and preferences, you may be better off with one or the other.

Challenger banks

New digital-only banks that promise slick apps and an effortless banking experience are proliferating in the UK, so you’re spoilt for choice. Monzo and Starling are among the most popular ones and they’re both fully licensed banks, while Revolut is really competitive if you also have to send money abroad fairly often. Aside from allowing you to open a bank account without worrying about your credit score, these banks also offer a few other features that can be useful to keep your personal finances in good order.

  • Great mobile apps. No more having to power up your computer to access all the features of your current account.
  • Budgeting features. Many of these apps automatically categorise your spending for you, telling you how much you’re spending and what for.
  • Saving features. You can set money aside in separate sub-accounts, set saving goals for them and have your banking app round up and set aside your spare change.

The downside, as you might have guessed, is that they don’t have physical branches, so you can’t go and discuss your circumstances in person.

Monzo and Starling also offer an overdraft facility with their accounts, but your credit history will only be checked if you actively apply for one.

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Basic current accounts

If you’re more into old school banking and don’t particularly like the idea of trusting your phone with your current account access, basic accounts are the second best option to open a current account with bad credit.

Banks don’t advertise them too much because they prefer customers to which they can offer an overdraft (that they can make money out of). However, if you look for them, you should be able to find them easily, and some banks will offer one to you if you don’t pass the checks for a standard account.

Basic current accounts aren’t that different from standard ones: you’ll still get a debit card and will be able to receive your salary, make and receive payments and deposit and withdraw cash.

However, you usually won’t be able to access the best current account deals, such as switching incentives or interest paid on your balance. While this is less than ideal, a basic current account will do the job.

How much does it cost?

Nothing! Most digital accounts and basic accounts have no monthly fee at all. In some cases you may still be charged for some features, for example, using your debit card abroad, but with many challenger banks that’s free too.

You’ll also find some dedicated current accounts for people with bad credit that charge a monthly fee and offer some extra features to help you keep your finances under control. They are an option and in some cases those features can be useful, but be aware that they are not your only choice, even if you can’t pass the standard credit check.

Dos and don’ts for banking if you have bad credit

Do

  • Get a no-credit-check current account. It’s a first step to get back on track.
  • Keep an eye on your spending. Whether you get instant notifications on your phone or simply check your statement regularly, it’s a good idea to know exactly how much you’re spending each month.
  • Draft a budget and stick to it. Digital banking apps’ budgeting features can help with that.
  • Check your credit score regularly. You can get it from the credit reference agencies. Once you know what’s wrong, you can work on fixing it.

Don’t

  • Use an overdraft. Even if you pass the credit checks, it’s an expensive way of borrowing money. Plus, paying it back won’t help your credit score.
  • Borrow more if you can avoid it. Especially if you still have to pay your creditors back.
  • Miss payments. It will further damage your credit score.

Frequently asked questions

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