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What is ChexSystems and How does it work?

Find out how ChexSystems works. What kind of checking or savings activity landed you in ChexSystems and how you can get out.

Did you know your bank is reporting information about your banking habits to several consumer reporting agencies? ChexSystems is one of the largest account screening consumer reporting agencies, maintaining banking information on over 300 million Americans.

What is ChexSystems?

ChexSystems collects, maintains, reports and produces data about how you manage both checking and savings accounts.

ChexSystems' huge database is used by banks, credit unions and other financial institutions to determine if potential customers will be a risk if a new bank account is granted.

It's important to know how ChexSystems works because once a consumer is reported to ChexSystems, the negative information can remain 5 years.

» Open a Checking Account: No-ChexSystems Banks

How ChexSystems Works

When you apply to open a bank account, many financial institutions will pull your ChexSystems report and check your ChexSystems score to review your banking habits. Your ChexSystems report has no impact on your credit score, although some banks will also pull a credit report to see how you pay your bills.

One of the biggest problems with ChexSystems is that only negative information is reported. There's no balance of positive and negative information to rely upon when banks pull ChexSystems records like with credit history reports where you can add positive reporting accounts.

This one-sided view of your banking history can be detrimental to people that perhaps only made one mistake that landed them in ChexSystems.

The types of information included in a ChexSystems Report include:

  • Number of times a consumer applied for a checking or saving account, auto loan, credit card or installment loan.
  • Names of banks, credit unions or alternative lenders that have requested a consumer report.
  • Number of times and dates when ChexSystems report was requested.
  • Accounts reported as closed by banks and credit unions.
  • Number of checks ordered by the account holder and the number of different accounts where checks have been ordered.
  • Number checks bounced at retailers.
  • Paid and Unpaid insufficient fund items (“NSF”)
  • Excessive “NSF” charges, even though you may have covered all of those charges.
  • Checking account habits that your bank may consider negative.
  • Any kind of Fraud.
  • Uncollected overdrafts, ATM transactions or automatic payments the bank paid.
  • Abuse of Debit Card, Savings Account or ATM Card.
  • Violation of any banking rules and regulations.
  • Opening an account with false information.
  • Delinquent or derogatory credit behavior.

There may be additional reasons a bank reports their customers to ChexSystems but the above list represents the most common reasons consumers end up in ChexSystems.

» Dump your prepaid card: Bank accounts for bad credit

Tips to deal with ChexSystems

1. You have a ChexSystems Score

ChexSystems produces a score based on the information in your ChexSystems file that determines how much of a risk potential account holders present. ChexSystems scores range from 100 to 899.

Because the ChexSystems score is merely a snapshot of a consumer report at the time the score was calculated, it can be improved. ChexSystems scores are dynamic similar to credit scores – the score will change to reflect changes in the report.

Here are a few factors that impact a ChexSystems score that can be improved:

  • Excessive recent credit inquiries
  • Insufficient or no credit history
  • Number of checks ordered and the number of different accounts the checks were ordered from
  • The number and dollar amount of returned checks at a retailer
  • Number of accounts banks have forcibly closed
  • Number of times a consumer has applied for an alternative credit account

TIP: These factors can have a negative or positive impact so there are ways to improve your ChexSystems score with good account management, for example: If you regularly have overdrafts sign up for overdraft protection.

2. Paid ChexSystems items are not removed

The fact that you pay an overdraft or other negative item does not mean ChexSystems will remove you from their database. Once your bank reports you to ChexSystems, the record can remain for 5 years. Even if the account has been closed and you no longer bank at that financial institution, a paid or unpaid ChexSystems item can remain for 5 years.

If you have resolved the issue with the bank make sure your report reads “all amounts owed have been paid” or a “paid status.” The bank which reported you should update your file with ChexSystems but unfortunately this does not always happen. If the resolved matter does not reflect a paid status, contact the bank immediately and request they file an update with ChexSystems or remove the item.

TIP: If you want to pay a bank for an item reported to ChexSystems, request the bank delete the account from ChexSystems  in exchange for payment.

3. You are entitled to a FREE ChexSystems Report

ChexSystems is a consumer reporting agency (CRA) and is subject to the Fair Credit Reporting Act (FCRA). You are entitled to a free copy of your ChexSystems report and can generally review it online.

TIP: You may also get a free report if you have experienced one of the following:

  • Denied a bank account due to information in your ChexSystems file
  • If you are unemployed and intend to apply for unemployment in the next 60 days
  • If you are on public welfare assistance
  • If you have reason to believe your file contains inaccurate information due to fraud

4. You can dispute ChexSystems records

If ChexSystems sounds like a credit reporting agency like Experian, Equifax or Transunion — it is. ChexSystems information can be incorrect, inaccurate, erroneous, outdated and may even be a result of identity theft. All of these circumstances can result in a denial by a bank or credit union.

Because ChexSystems is a consumer reporting agency like the traditional credit bureaus, information in ChexSystems can be disputed. It may be worth disputing negative information to clear your name before the 5 year reporting period ends.

TIP: ChexSystems will remove records for people that file Bankruptcy. Bankruptcy discharges consumer debts like overdrafts and bank fees.

5. Can you open a bank account while in ChexSystems

You may be questioning if you can open a bank account while in ChexSystems, and the answer is Yes. A ChexSystems report does not mean you'll be prevented from opening a new bank account. Second chance banking gives people with ChexSystems records an opportunity to open a new bank account.

Second chance checking accounts typically have stricter standards which may mean your deposits are held longer or you may have limited checking writing privileges. The good news is that banks offering second chance accounts oftentimes upgrade customers to standard checking accounts after 12 months of good account management.

TIP: Second chance banking programs help you avoid problems opening a new account while in ChexSystems. Even if the bank runs a ChexSystems report, a second chance bank account overlooks past banking mistakes.

6. Banks that don't use ChexSystems offer alternative banking options

Consumers with multiple ChexSystems records may find it exceptionally difficult to get a new bank account, even if the item has been paid. Second chance banking options may not be available, especially if fraud is indicated. Banks that don't use ChexSystems may be the only option.

TIP: It's always a good idea to have two bank accounts if you're in ChexSystems. A bank’s loss prevention department may run “sweeps” on a selected group of accounts and if they find old ChexSystems records that can be a reason to close your account.

Who owns ChexSystems?

ChexSystems is a nationwide specialty consumer reporting agency owned by Fidelity National Information Services, which provides banking software and other technological support for financial institutions. ChexSystems is a consumer reporting agency, they fall under the regulation of the Fair Credit Reporting Act.

ChexSystems collects information about your checking and savings account history. They provide information to the banks that make decisions, ChexSystems does not make account opening decisions.

Frequently asked questions about ChexSystems

How long does your name stay in ChexSystems?

5 Years. Accounts reported to ChexSystems can remain five years. You have the right to dispute information in your ChexSystems file either with ChexSystems or dispute directly with the bank that reported you to ChexSystems . If your dispute is successful you can be removed from ChexSystems prior to the 5 year reporting time period. Meanwhile, second chance banking provides account options for people looking to open a new account.

What does it mean when you are in ChexSystems?

Essentially it means you're blacklisted from opening a new account unless you find a bank that does not use ChexSystems. ChexSystems is a checking account reporting company that is used nationally by 80 percent of banks and credit unions. ChexSystems keeps track of people's banking habits like bounced checks, excessive overdrafts, account abuse, check fraud, failing to pay negative balances on closed accounts and even bank inquiries when you apply for a bank account.

How long does it take a bank to report to ChexSystems?

Each bank has its own policies when reporting accounts to ChexSystems. For instance, if you leave a negative balance unpaid for a certain period some banks will wait as long as 90 days before reporting the account to ChexSystems, whereas others will sooner.

Do credit unions use ChexSystems?

Yes. Credit unions may use ChexSystems to make a decision to open new accounts but many offer second chance checking accounts that may come with a monthly fee and limited banking options during a probation period. After 12 months of good account management second chance checking can upgrade to standard checking accounts.

Does ChexSystems affect my credit score?

No. Bank account information is not part of your credit scores. Credit scores are only calculated based on the information in your credit history. While opening a bank account may involve a soft pull on your credit report to verify your identity, ChexSystems records do not affect credit scores.

Can you be denied a bank account based on ChexSystems?

Yes. You can be denied a bank account due to information in ChexSystems, Early Warning Services, Telecheck, and even bad credit. Under the Fair Credit Reporting Act, banks are required to tell you why you've been denied a bank account.

Request your free ChexSystems consumer disclosure report if you have been denied an account and ChexSystems was used in the decision process.

Why do banks use ChexSystems?

The major reason banks use ChexSystems is to avoid risk. Some behavior banks consider risky is unpaid debt with a bank and a history of frequent overdrafts.

Can I include unpaid overdrafts in Bankruptcy?

Yes. In fact, If you have filed bankruptcy, ChexSystems can remove you. Bankruptcy includes unsecured debts including any fees and overdraft charges from any financial institutions. ChexSystems has a department to handle consumers that have filed bankruptcy. Even if your ChexSystems record indicates fraud, they will clear your record. But it is up to you to contact ChexSystem’s Bankruptcy department directly. They will not automatically remove you just because you have filed bankruptcy. The direct number to ChexSystems Consumer Relations is 800.428.9623.

Too many ChexSystems inquiries can hurt you.

When you apply at a bank that uses ChexSystems an inquiry appears on your ChexSystems report. Too many inquiries on your report can cause ChexSystems to “flag” your account for suspicious activity. Many consumers don't know they are in ChexSystems and continue to apply at bank-after-bank after they have been denied. Applying at multiple banks only hurts your chances of opening an account.

ChexSystems may not automatically remove you after five years.

Each negative item reported to ChexSystems can remain for five years unless the source of the information requests its removal. After five years ChexSystems does not necessarily remove the negative listing automatically. It is up to you to check your report to make sure outdated information is deleted.

Will freezing my ChexSystems allow me to open a new account.

Perhaps. Banks that use ChexSystems will likely request you “unfreeze” your ChexSystems report if they run it and it's blocked. If you refuse to remove the ChexSystems freeze, the bank can simply deny you a new account. The purpose of a ChexSystems freeze is to prevent others from accessing your report without your permission, not to circumvent negative ChexSystems records.

Final thoughts on ChexSystems

Now that you have a little information on ChexSystems, find out about Early Warning Services, it may be another reason why you were denied a bank account. Plus discover more facts about ChexSystems that can help clean your records.


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