Opening an account


#1

I hope someone could shed some light on this matter.

I’ve got bad credit due to credit card debts 3 years ago.

I’d like to know if I am still able to open a savings account if I want to save again.  Do banks run a credit check when you open an account (without overdraft)?


#2

Hi 

Most of the large banks appear to not do external* credit checks to open a standard savings or transaction account. I include BNZ, ASB, Kiwibank, ANZ and RaboDirect. I do not know about Westpac.

Credit Unions do not do credit checks and are less likely to decline you anyway.

Smaller banks do credit checks and will very likely decline for any ‘issues’. CoOp is definitely on this list and it’s my understanding TSB and SBS are as well.

It’s possible the listing status may have some effect - whether it shows as paid or unpaid - but if it’s still outstanding I suggest you find a way to bring it to resolution. See recent previous threads authored by  where I have listed the options for this.

*External - with a reporting agency - usually Veda. It should be assumed they will all do internal checks against their own records of any previous business.


#3

Great question. The short answer is it depends on each banks policy and how they enforce it. In NZ we are sometimes discriminated against in that we have no inherent right to a bank account if we are in default to another party. I have defaults listed against me on my credit report for credit card debt. I tried to open a bank account with SBS bank. They refused because I have defaults listed. They also wrote to me and stated they would be ensuring that their staff knows not to open bank accounts for people that are in default. When I first applied for a bank account they did actually open it before they had a copy of my credit report. They actually transacted against the account then closed it once they saw my credit report.

I did successfully open an account with Coop bank while a default was on my credit report. I first went to the manager of the bank and told him my story. They also do credit checks so they knew about my situation before they did the check.

I don’t know yet if all banks credit check you. My advice is to obtain a copy of your own credit report first. The banks will mostly use Veda because they are the only reporting agency that uses numbered credit scoring. Some banks will use the credit score to determine whether you can open an account or not. To know what your own credit score is you must pay $51.95 to Veda. But you can get a free report but it won’t have the score. But it will list your credit history. Which is what the banks want to know.

My advice is to get a copy of Veda’s free  report. It takes a few weeks, or you could pay $10.00 and get it within a few days. Its valid for one month. Neither will contain the score. Then go and actually make a sit down meeting with the bank manager (not a personal banker or a customer services person). Show him your report and explain your situation. They may let you open the account. The bank may not need to credit check you. They all know that any enquiry is perceived negatively by the banking industry. The less enquiries you have lodged against you, the better. The entry of bad credit will stay on your report for five years. All enquiries also stay on the report for five years as well.

Also If a bank makes an enquiry only, I was of the impression that you do lose points against your credit score. Even if the account is only a savings or transactional account. I am now reviewing my data and conducting different research to answer that properly because that may not be the case. Whether you lose points or not when a bank does a credit check, an enquiry will still appear against the report regardless, assuming that bank subscribes to Veda.
The other two credit reporting companies don’t have credit score numbering systems.

That’s my advice. Others may have other experiences. That may contradict my experiences.
At the end of the day, it won’t do any harm to actually meet with the bank manager.

Because there is no consistancy in regards to opening a bank account when defaults are listed on a credit report, and there is discrimination,  I make it a personal rule not to bank with a bank whose manager I haven’t met in person, or at least had a telephone conversation with.

My hope is one day the banks will accept all people as customers regardless of their past wrongs.


#4

It is my understanding the number of recent checks is only an issue if they involve lending. Lenders get nervous about people opening up multiple credit lines in a short period of time. But I expect this would be a matter of context. Having 2 or more checks while you are shopping around for a residential mortgage (which has it’s own specific code on Veda reports) is unlikely to be perceived this way.

The upshot is - the main thing they want to know is whether there is any negative information - defaults, past due bills etc. If there is, some people at the bank may well then look for additional reasons to decline especially if they have someone arguing the toss with them as I expect  has done. If they don’t have a reason to decline they probably don’t look any further. In short I doubt the debate is worth having if it arises - just keep shopping around.

Banks are commercial businesses and they don’t owe people provision of services. There is always an option for someone to get an account even if it’s an option of last resort like a Credit Union. Having said that, I expect there are some people who are ‘unbankable’ but there will be a back story there - more then just a default on a credit card to one bank as @fresh_start outlines. 


#5

Thats true


#6

Thanks for your answer, Ford. It was very informative. Could I ask why you had to go to SBS to open your bank account and get declined when the big ones wouldn’t even require a credit check anyway?


#7

Thanks, @michaelnz. It was a relief to have read your message.  Are you sure the banks you’ve mentioned don’t do credits during account opening? I tried to look for information regarding this on their websites but they don’t seem to say anything.


#8

 - quite simply because I wanted to bank and support NZ Banks.
It has been a huge shock to find out how the debt collection and reporting industries really operate. I was hoping NZ banks were different but it doesn’t appear that they are. I am also researching the industry to see what needs to be changed.

Also I was considering filing for an insolvency procedure and I found out that my current bank who I don’t have any defaults with would remove my internet banking facility and eftpos cards as a matter of policy. I would have had to transact over the counter.


#9



I am only offering a combination of my experience and what I researched during the period I was affected by a challenging credit report. It is now clear again.

What I suggest you do is go into the branch, say nothing and do not try to open any forms of credit account - because they all do credit checks for this and you wouldn’t want to bring it to their attention…

Out of the list I would give ASB a pass. They are a difficult bank to deal with regardless of credit checks. I suggest you also pass on any of the small banks as they are all very conservative.

The advice I offer anyohne is know what your comfort limit is. For me I know I can comfortably handle hundreds of dollars and can manage a couple of thousand of high interest ‘consumer’ debt. I don’t routinely use credit but if I needed it, that’s an amount I can work with.

These days I avoid credit or only use what I can pay off in full by the due date. I also make regular payments in advance to the taxman - because I file an IR3+IR4 (self employed) - so come due date it’s already been paid.

Credit card debt is no fun and they should be treated as the work of the devil. lol.


#10

Yep the GEM visa interest rate is 25.45% huge. That’s worse than the devil.

I am not in default thank goodness and the balance is reducing.
What I noticed if I was to only pay the minium payment they suggest each month 48% of that payment actually goes towards interest only.
I’ve asked GEM if I can have access to the online statements.
Currently I pay the $1.00 monthly fee to have the paper copy.
GEM say their interest rate applies to purchases and cash advances. I expect its compounding though.
Because I already have defaults I would not be eligible for any balance transfer.
As nobody would give me a credit card. I might see if I can convert it to a personal loan and ditch the credit card altogether.
They keep bombarding me with advertising. But it might be a lower interest rate.
The trouble is of course the lending industry keeps the true cost of borrowing hidden.
I’ll do the same exercise I did with the banks credit card which was to work out how much of the debt is actually interest and penalties.