How can I open a bank account with a bad credit rating?

It’s surprising what counts as ‘credit’ these days – everything from bank loans, credit cards and mortgages, right down to current account overdrafts, utility bills and even your mobile phone contract.

Got a phone bill you pay at the end of the month? That’s credit. Got a handset bundled with that contract? That’s credit too – and probably listed as a separate ‘loan’ on your credit file.

Miss just one payment on anything that is officially considered a form of credit, and your credit rating will take a hit. Even just enquiring about too many loans, mortgages or accounts in a short space of time can lower your score.

So if you’ve found yourself in a credit score spiral – rejected by one account provider for your credit rating being too low, but afraid to apply elsewhere and risk damaging it further – what are the options?

Bad credit reasons for rejection

Your credit score is just a number, but it’s based on lots of different things. Some of the reasons why you might have a bad credit rating include:

  • Missed payments on utility bills, phone bills and other household running costs.
  • Missed repayments on traditional forms of lending like loans, credit cards and overdrafts.
  • Rent and mortgage arrears.
  • Lots of credit applications in a short space of time – e.g. struggling to get approved for a mortgage.
  • Historic credit problems still on your file.
  • Errors that are not your fault but have lowered your rating by mistake.

It’s possible to get errors removed from your file, and historic credit problems will eventually stop affecting your present-day score, but all of this takes time.

In the meantime, if you just need a current account you can use to manage your money, for example if you have closed a bank account that you felt put you at risk of even more debt problems, then there are alternatives.

How an Arro Personal Account can help

An Arro Personal Account is not a bank account, but an online electronic money services account – we are not a bank and we do not rely on earning interest on customer debts to make our money.

In fact we do not lend at all. There is no overdraft on an Arro Personal Account and we do not provide credit cards, just a MasterCard® debit card linked to your account.

While it is of course still your responsibility to keep your account balance above zero, we do not routinely expect our customers to live using an overdraft or credit card – so there is less temptation to spend money you don’t have.

Crucially, this also means there is no credit assessment as part of each new account application, so we can approve you no matter what your credit score is.

How limited is a bad credit account with Arro?

It’s not. We literally do not check applicants’ credit ratings when approving a new account, so we have no way of knowing if you have a bad credit score or not – the terms and conditions of your account are exactly the same either way.

You get an active account with sort code and account number, access to our online dashboard to manage your money and account details, and a MasterCard® debit card so you can spend from your positive account balance as you wish.

The card works wherever MasterCard® Debit is accepted, in-store and online, and you can use it to make cash withdrawals from your positive account balance at ATMs too.

We want to put you in control of your own money, but without the temptation of credit you do not need. That’s why there’s no overdraft, no credit card, and absolutely no credit assessment needed to open an Arro Personal Account.

Ways to move your money

We make sure you still have access to the most common ways of moving money, including the MasterCard® debit card mentioned above.

You can receive payments via your sort code and account number – so you can still get paid directly into your account by your employer or any other sources of income.

And you can set up Faster Payments and Direct Debits (this feature is coming soon!) to pay your bills on time, and start rebuilding your credit score.

You are ultimately responsible for your account, but it’s a first step towards managing your money better, and by tackling any outstanding credit issues on your file, you can work towards a future where more financial products are accessible.