What Is ChexSystems?
Key Takeaways
- Financial institutions review ChexSystems reports before they open bank accounts for new customers.
- ChexSystems reports show negative banking history, so if you had – or currently have – accounts that are in good standing, you probably don’t have a report with your name on it.
- It’s important to get a copy of your report so you can see what needs to be fixed and if there are any errors that need to be disputed.
When you want to borrow money, lenders will check your credit to see if you’re a reliable borrower. Similarly, if you want to open a checking or savings account, banks will look at another report: your ChexSystems report.
ChexSystems is a consumer credit reporting agency. It was created under the federal Fair Credit Reporting Act. The agency collects information about closed checking and savings accounts, and reports that information to banks, credit unions and certain other entities that request it.
The purpose of ChexSystems reports is to help financial institutions assess the risk of allowing new customers to open bank accounts. If a person has a history of unpaid fees, overdrafts or other issues, the bank may deny the consumer an account. In fact, most people only find out they have a ChexSystems report if they’re rejected for a bank account, according to Leslie Tayne, finance and debt expert and founder of Tayne Law Group.
What Are Banks on the Lookout for in a ChexSystems Report?
“Banks and credit unions are looking for irregularities in previous banking relationships – things like overdrafts, bounced checks, negative balances and even frequency at which accounts are opened and closed,” says Matt Bundrick, co-founder of BankBonus.com. He notes that, unlike credit bureaus, ChexSystems reports only contain negative information.
The good news is that if you had a mistake in the past, it won’t necessarily work against you. Many people have accidentally overdrafted their account or bounced a check before. Banks are more interested in catching patterns that indicate these are ongoing issues.
Also, keep in mind that ChexSystems reports the reasons your past accounts have been closed. Activity for accounts that are currently open and in good standing doesn’t show up on your report.
Finally, entries on your ChexSystems reports typically only stay for five years. After that, banks won’t be able to see past problems with old accounts.
Can You See Your ChexSystems Report?
Just as you can check your credit reports for free, you’re also able to see your ChexSystems report. You’re entitled to see a copy of your ChexSystems report once every 12 months. Additionally, you can get a copy of your report if you were denied a checking or savings account within the past 60 days. In that case, the bank must also provide the reason you were denied.
There are a few ways to request a copy of your report. First, you can do so on the ChexSystems website, where you have the option of receiving your copy electronically or through the mail. You can also request a copy by calling 800-428-9623. Finally, you can download the request form and mail it to the following address:
ChexSystems, Inc.
Attn: Consumer Relations
PO Box 583399
Minneapolis, MN 55458
Once ChexSystems receives your request, your copy should arrive within five business days. Note that checking your own ChexSystems report doesn’t impact your credit in any way.
How Can You Clear Your ChexSystems Report?
Five years is a long time to wait for negative entries to fall off your report. In the meantime, you could have trouble opening new bank accounts. So you might be wondering whether it’s possible to clean up your report.
There are a few things you can do to clear your ChexSystems report. First, if the report shows that you still owe money to any institutions, you should pay the balance due. Then you can ask the bank to update your report to reflect that your account is paid in full. Or you can send a receipt directly to ChexSystems and have your report updated.
In some cases, your negative report could be due to an error and not a mistake on your part. “Much like checking your credit report, you should be on the lookout for incorrect information,” Bundrick says. “You have a right to dispute items in your ChexSystems report, either directly with the bank or credit union, or through ChexSystems’ online dispute process.” Investigations are usually completed within 30 days.
What Are Your Options if You’re Denied an Account Because of ChexSystems?
If you’re denied a bank account because of a negative ChexSystems report, you have a few options. First, you can look for banks that don’t use ChexSystems reports. This may limit your options, though.
“Another option is to ask the financial institution if they offer a second-chance checking account, which is a special account that some banks offer to those with blemishes on their credit report/ChexSystems report,” Tayne says. Eventually, after you’ve responsibly handled your second-chance account, you should be able to open a regular bank account.
However, Tayne notes that second-chance accounts can have higher fees than traditional bank accounts. “So make sure to read the fine print before signing up,” she says. Still, a second-chance account is almost always a better option than expensive prepaid debit cards or check-cashing services.
