ChexSystems is a nationwide credit reporting system that collects information about closed bank accounts and why they were closed. If you’ve ever had a checking or savings account in your name, it’s possible that you may have a ChexSystems report.
ChexSystems is authorized to operate under the Fair Credit Reporting Act (FCRA). Although it’s different from traditional consumer credit reporting, like the kind done by Equifax, Experian, and TransUnion, they’re both part of having a clean banking and credit record.
If you have a bank account or plan to open one, it’s helpful to understand what goes into a ChexSystems report and why it might matter to you.
How Does a ChexSystems Report Work?
A ChexSystems report is essentially a risk-management tool for any entity that’s checking any individual’s banking and credit history. The information in the report that ChexSystems compiles helps companies gauge whether a customer is creditworthy before granting them an account. It’s based only on closed accounts, not current ones.
For example, say you want to open a new bank account: The bank may request your ChexSystems report to see if you’ve ever had previous bank accounts closed in the past for things like excessive overdrafts, bounced checks, or suspected fraud.
Companies that have a permissible purpose under the FCRA, i.e., banks, credit unions, and other financial institutions, can then request a copy of a consumer’s ChexSystems report.
If the bank sees any kind of negative activity on your ChexSystems report, you may be denied a checking and savings account.
The information in your ChexSystems report can also be used to generate a ChexSystems consumer credit score. This is separate from consumer credit scores generated using the FICO or VantageScore models to help lenders decide who may qualify for a loan.
Recommended: Why is Having a Good Credit Score Important?
What Is In a ChexSystems Report?
Your report will include basic identifying information, such as your name, address, phone number, and date of birth. If you’ve ever had a security freeze in place, that will show up on your ChexSystems report, as will identity theft alerts.
More importantly, your ChexSystems report includes details about your banking history. So what does ChexSystems check for, exactly?
A typical ChexSystems report may include information about:
• Suspected fraudulent activity
• Non-sufficient funds (NSF) activity
• Inquiries (when someone has viewed your ChexSystems report)
• Check cashing inquiries
• Returned checks reported by retailers
• History of checks ordered
• Checking account closures
ChexSystems only collects negative information for closed accounts. So any open bank accounts you have wouldn’t show up on a ChexSystems report.
How Do I Know If I Have a ChexSystems File?
The easiest way to find out if you have a ChexSystems file is to request a copy of your report. You can get a copy of your ChexSystems report for free once every 12 months under the Fair and Accurate Credit Transaction Act (FACTA), similar to the way you can request a free copy of your credit reports once a year from the three main credit bureaus.
Being denied a bank account could be a tipoff that you have a ChexSystems report with negative information. If you’ve been denied a bank account, you can request a copy of your ChexSystems report to understand the factors behind the bank’s decision. The bank is required to specify the reason for the denial.
How to Get a Copy of Your ChexSystems Report
You can request your report online, by phone, by mail, or by fax. Here are four ways to get in touch with ChexSystems to request your report:
• You can complete and submit the Consumer Request for Disclosure Form online.
• You can call 1-800-428-9623 Monday through Friday, 8:00 am to 7:00 pm CST.
• You can mail a Consumer Request for Disclosure Form to ChexSystems, Inc., Attn: Consumer Relations, PO Box 583399, Minneapolis, MN 55458.
• Or you can fax a completed Consumer Request for Disclosure Form to 602-659-2197.
ChexSystems also offers options for people with visual or hearing impairments.
You have to be 18 or older to request a ChexSystems report online. If you’re under 18, you have to complete a Score Order Form and request your report by mail, fax, or phone.
If you need to request a ChexSystems report for someone who’s under 18, you’ll have to send the request by mail or fax. You’re required to provide the following documentation:
• Notarized copy of the minor’s birth certificate
• Copy of the minor’s Social Security card
• Copy of your driver’s license or state-issued ID (if you’re the minor’s parent or legal guardian)
• Proof of address
If you’re not the minor’s parent or your name isn’t on their birth certificate, you’ll also have to provide proof of legal guardianship. That can be a court order or other legal document.
To request a ChexSystems report for anyone else, such as your spouse or an aging parent, you’ll need to provide a notarized Power of Attorney. You’ll also need a notarized written document that’s signed by the person you’re making the request for.
What to Do If You’re Listed in ChexSystems
If you’re listed in ChexSystems, you can request a copy of your report to see what negative information is being reported. You can also look for any information that may be inaccurate or erroneous. If you see information that you believe should not be listed in your ChexSystems file, you can initiate a dispute with ChexSystems. The process is similar to disputing errors on a regular credit report.
However, when the information in your ChexSystems file is correct, there isn’t much you can do to get it removed. Instead, you’ll have to wait for it to fall off your ChexSystems report. ChexSystems can maintain information for up to five years.
Can You Get Yourself Removed From ChexSystems?
It may be possible to get yourself removed from ChexSystems if you’re able to successfully dispute inaccurate information in your file. If you’re denied an account, and ChexSystems determines that the information is correct, then you’ll either have to wait for it to fall off your file, or you can try a different tactic and ask the bank to remove it. Banks are not obligated to do this, however.
If the bank is willing to remove negative information, keep in mind that there may be a financial obligation you need to meet first. For example, if you closed an account with a negative balance, you may need to make a deposit to bring the balance back to zero. If you go this route, be sure to get written confirmation that you’ve paid off anything owed to the bank and that the account is closed to avoid triggering any additional banking fees or charges.
How to Clean Up Your ChexSystems Report
To clean up your ChexSystems report, you’ll first need to get a copy of it if you haven’t done so already. You can then dispute any negative information you find. This may help to improve your ChexSystems profile if you can get the information removed.
As mentioned, you can reach out to the bank and offer to make good on any outstanding obligations. The bank could agree to remove the negative information. Going forward, you can prevent any further negative information from being reported by practicing good banking habits.
You can do that by:
• Maintaining positive balances across accounts so you don’t land in overdraft
• Keeping of checks and deposits to avoid bounced checks
• Protecting your banking information to prevent fraud
• Reporting any suspected fraud to your bank right away
Those actions won’t erase a negative ChexSystems file. But they can help you to stay on your bank’s good side.
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How Does a ChexSystems Report Affect Your Credit Score?
Your ChexSystems report doesn’t affect your consumer credit scores directly. FICO credit scores, for example, are based on how responsibly you manage credit and debt (e.g. how often you pay bills late, how much of your available credit you’re using, and how often a hard credit inquiry shows up on your report).
Those are some of the main factors that affect credit scores.
But financial institutions could take both types of reports into account, when evaluating you for a new loan, checking, or savings account.
What if I have a low credit score? In that case, you might find it harder to get approved for credit. And if you are approved, you may be looking at much higher interest rates. That’s because lenders may view you as being a riskier borrower. The logic is the same with your ChexSystems report and score: Banks and lenders typically give better terms to those with a clean financial bill of health.
What to Do If You’ve Been Denied a Checking Account
If you’ve been denied a checking account because of a negative ChexSystems report, it helps to know what to do next.
• Request a copy of your ChexSystems report to understand why you were denied.
• Review your ChexSystems report for any errors or inaccuracies and dispute any errors you find.
• Ask the bank to reconsider the denial.
• If the bank is unwilling to reconsider, ask about second chance bank accounts.
Second chance bank accounts are designed for people who have been denied a checking account previously. These accounts may have higher fees or more restrictions than regular bank accounts. But they can help you reestablish a positive banking history if you have a negative ChexSystems report.
The Takeaway
ChexSystems is a nationwide reporting system for closed bank accounts. Qualified institutions may access ChexSystems reports to evaluate individuals who are applying for new checking or savings accounts. Being listed in ChexSystems means you may hit a snag when applying for a new bank account, typically because you have one or more negative incidents on your closed accounts (e.g. overdrafts, fraud, unpaid negative balances).
The good news is, there are banks that don’t penalize you for having a negative ChexSystems report. Also, you can dispute errors on these reports — or fix old mistakes. For example, it’s possible to be proactive and pay off an old, negative balance, and potentially improve your ChexSystems report. Otherwise, you have to wait five years for old information to drop off the report.
If you’re thinking of opening a new bank account, consider the all-in-one online bank account with SoFi — no ChexSystems report required! You’ll pay no management fees with SoFi, and you can earn a great APY when you qualify by setting up direct deposit.
FAQ
Can you get out of ChexSystems?
It may be possible to get out of ChexSystems if your report includes information that’s inaccurate or reported in error. You’ll need to dispute the information through ChexSystems in order to have it corrected or removed from your file.
How long does a person stay in ChexSystems?
Generally, negative information can stay on a ChexSystems report for up to five years. If you have multiple negative items on your ChexSystems report, the five-year reporting time frame applies separately to each one.
Which banks report to ChexSystems?
ChexSystems doesn’t specify which banks use its reporting system. If you’re unsure whether a bank reports to ChexSystems or reviews ChexSystems reports when you apply for a new account, you can call the bank and ask. You can also ask whether second-chance banking is an option, in case you’re denied a traditional bank account.
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