ChexSystems is a consumer credit reporting agency that tracks activity related to closed checking, savings and other deposit accounts at banks and credit unions. If you’ve ever had issues with a deposit account, such as a bounced or returned check, you may have a ChexSystems profile. While your ChexSystems history does not directly affect your FICO credit scores, it may impact your ability to open new bank accounts.
Key points to remember
- ChexSystems is a consumer credit reporting agency that collects information about closed deposit accounts at banks and credit unions.
- The type of activity that ChexSystems tracks is related to issues with deposit accounts, such as bad checks.
- Having a ChexSystems file could make it difficult to approve new bank accounts.
- Prepaid debit cards and second chance checking accounts are alternatives to consider when you can’t qualify for a standard bank account.
What is ChexSystems?
ChexSystems, Inc. is a consumer credit reporting agency covered by the Federal Fair Credit Reporting Act (FCRA). The company collects and reports information on closed chequing and savings accounts. ChexSystems then provides this information to banks, financial institutions and other types of businesses authorized to access it under the FCRA.
In doing so, ChexSystems helps banks and other businesses that have the right to access your records to assess risk. In this sense, the company works in the same way as the credit bureaus which collect information about your debts. There are specific rules that apply as to when a company can request your ChexSystems report. Under the FCRA, covered situations include:
- Business transactions initiated by you, such as requesting the opening of a new checking account
- Requests that have your express written permission
- Applications for licenses or other benefits granted by the government when the law requires consideration of financial responsibility
- Child support determinations
- Subpoenas from your financial records issued by a federal court order or grand jury
Again, ChexSystems only collects information related to closed bank accounts. It does not track information about bank accounts or active credit accounts, such as credit cards, loans, and lines of credit.
ChexSystems only provides information; it does not actively approve or deny bank accounts.
How ChexSystems Works
ChexSystems collects information relating to closed checks or other bank accounts. This may include:
- New chequing account requests
- Verification of account openings or closings
- Check writing history, including bad or returned checks
Your ChexSystems report may also include items such as overdrafts, unpaid negative balances, and suspicions of identity theft or bank fraud. When you request a new bank account, the bank or financial institution in question may request a copy of your ChexSystems report. They can then use this information to determine whether to approve you for a new account.
Specifically, ChexSystems may share the following with banks:
- ChexSystems Consumer ScoreâThis score is based on the information in your ChexSystems Consumer Disclosure report. A higher score is better because it means you are a lower risk for the banks.
- ChexSystems Consumer DisclosureâThis report is a collection of information about your closed bank accounts, including the types of items listed above. Again, this looks like a credit report, but it only focuses on banking activity.
The information included in your ChexSystems report can typically stay there for up to five years. ChexSystems may remove it at the request of the bank or financial institution that provided the information or if credit reporting laws require otherwise.
You can request a free copy of your ChexSystems Consumer Score and Consumer Disclosure on the company’s website.
What to do if you are listed in ChexSystems
You may not know you have a ChexSystems report until you request a bank account and have been refused. If you have been told that you cannot open a bank account due to negative reports from ChexSystems, the first step is to request a copy of your consumption statement. Again, this is available to you at no cost.
Once you have a copy of your ChexSystems report, you can review it carefully to verify that all of the information included is correct. If you spot an error or fault, you have the right to challenge it. You can do this online through the ChexSystems website, and once a dispute request is filed, the company is obligated to investigate and determine whether the information in your file is accurate. Investigations are typically completed within 30 days (21 days for residents of Maine), but can be extended by 15 days if you provide additional information while the investigation is in progress.
Once the investigation is complete, ChexSystems will notify you in writing of the results. This does not guarantee that any negative information will be removed or corrected, but it is worth exploring if you believe you have been reported to ChexSystems in error.
Bank Account Options When You Are Listed In ChexSystems
If you have a ChexSystems file, you may be refused a checking account or a traditional savings account. In this scenario, you can explore two alternatives for managing your money.
The first is a second chance bank account. Second chance accounts, also called low risk accounts, are designed for people who have had banking problems in the past. These accounts usually differ from regular bank accounts in things like:
- Minimum deposit requirements
- Monthly maintenance fees
- Transaction limits
- Debit card access
- Check write access
Second Chance accounts can be found at traditional banks and credit unions, and you can also find them online. These accounts can help you restore a positive banking history and depending on the bank, you may be able to convert to a regular bank account after a set period of time.
Another option for managing your money when you have been denied a bank account due to your ChexSystems history is to use a prepaid debit card instead. These cards allow you to load money and then withdraw money or make purchases just like you would with any other debit card. The difference is that they are not linked to a bank account.
When comparing prepaid debit card options, look for the ones that offer the best combination of low fees and added perks, like the ability to sign up for direct deposit or earn money on purchases.
When choosing a prepaid debit card for your spending, consider the following:
- How much you can charge at any time
- Loading methods (cash, direct deposit, mobile deposit)
- Where and how to use the card (for purchases, at ATMs, online bill payments)
- Online and mobile access
- Fees, including initial card purchase fees, monthly maintenance fees, and reloading fees
A prepaid debit card won’t help you establish any kind of positive banking history, and you could have headaches if your card is lost or stolen and you have to pay to replace it. Nonetheless, if you are unable to qualify for a regular bank account or a second chance bank account, they may be a better option for managing your money than using cash.
Can you get removed from ChexSystems?
If you have a ChexSystems case due to issues with a bank account, the case can stay for five years. To be deleted before this date, you must either successfully challenge the ChexSystems registration or the bank that reported you. You can get a free copy of your ChexSystems report, which you should review for errors. If you find any inaccurate information, file your dispute with the entity that placed the false information.
How often can you get a free copy of your ChexSystems report?
Once a year. You can get a free copy of your ChexSystems report and score every year. You must request the report. It is not sent automatically. Asking for your report does not hurt your credit score.
How do you know if you have a ChexSystems file?
You might not know it until you request a bank account and have been authorized to do so. If this happens to you, request a free copy of your ChexSystems report, which you can do on an annual basis.