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Just as lenders review your credit report when you apply for a loan, banks and credit unions may review a ChexSystems report when you apply for a new checking or savings account. ChexSystems is a specialty consumer reporting agency that collects information about checking and savings accounts and provides reports to financial institutions to help them assess the risk of opening an account for a consumer.
If your report contains negative information, such an account that was involuntarily closed with an unpaid balance, a history of returned checks, or suspected fraud, a bank or credit union may decide not to approve your application.
Below, we take a closer look at how ChexSystems works, what information it tracks, how to obtain and, if necessary, address information in your report, and how a ChexSystems report can affect your ability to open a bank account.
Key Points
• ChexSystems is a specialty consumer reporting agency that collects data on checking and savings account history to help financial institutions assess risk.
• Financial institutions often use these reports when evaluating applications for new accounts, though they do not solely dictate account approval decisions.
• Negative information such as involuntary account closures, unpaid balances, or suspected fraud can appear in a report and potentially affect the ability to open new accounts.
• Consumers have the right to request a free copy of their ChexSystems report at least once every 12 months to check for inaccuracies or unauthorized activity.
• Disputing errors or resolving outstanding balances can be effective ways to address negative items and potentially improve standing with financial institutions.
Understanding ChexSystems
ChexSystems is a nationwide specialty consumer reporting agency governed by the federal Fair Credit Reporting Act (FCRA). Banks and credit unions can provide ChexSystems with information about checking and savings accounts, particularly accounts that were closed because of suspected fraud, unpaid negative balances, or other account-related problems. ChexSystems uses this information to create consumer reports that financial institutions may use when evaluating applications for new accounts.
ChexSystems does not decide whether you can open a new bank account. The bank or credit union makes that decision based on its own policies and may consider information from ChexSystems along with other factors.
ChexSystems generally retains reported information for five years from the report date, although information may be removed sooner in certain circumstances. Paying or settling an accurate debt does not necessarily cause the information to be deleted. Instead, ChexSystems can update the account’s status to reflect that it was paid or settled.
Is ChexSystems Legit?
Yes. ChexSystems is a legitimate consumer reporting agency governed by the FCRA and overseen by the Consumer Financial Protection Bureau and the Federal Trade Commission. As a result, the agency must meet certain strict requirements, such as reporting information accurately and investigating disputes from consumers in a timely manner.
What Is in a ChexSystems Report?
A ChexSystems consumer report focuses on information related to your history with various types of savings accounts and checking accounts. It is different from a traditional credit report, which primarily tracks borrowing and repayment activity.
Information that may appear in a ChexSystems consumer file includes:
• Checking and savings accounts that were forcibly or involuntarily closed
• Returned checks reported to ChexSystems
• Unpaid balances associated with closed accounts
• Suspected fraud or other account-related problems
• Records of inquiries made about your ChexSystems file
• Records of check orders you have placed
Not every checking or savings account appears in a ChexSystems report. Open or active accounts and voluntarily closed accounts with no history of mishandling generally are not included in your ChexSystems consumer file.
What Is ChexSystems Used For?
Banks and credit unions may review your ChexSystems report when you apply for a checking or savings account. They use information in the report to help assess the risk of opening an account for you.
A negative item does not automatically mean you will be denied. Each financial institution sets its own policies, and some institutions may consider other information when making their decision. Depending on its policies, a bank or credit union may approve your application, deny it, or offer an account with different terms.
How to Get a Copy of Your ChexSystems Report
Under the FCRA, you are entitled to a free copy of your ChexSystems consumer disclosure report at least once every 12 months. You may also qualify for additional free reports in certain circumstances, such as after an adverse action based on information in your report.
You can request your report through the ChexSystems Consumer Portal, by phone, or by mail:
• Online: Visit the ChexSystems website (ChexSystems.com) and use the Consumer Portal to request your consumer disclosure report.
• By phone: Call ChexSystems at 800-428-9623.
• By mail: Complete the Consumer Request for Disclosure form and mail it to Chex Systems, Inc., Attn: Consumer Relations, PO Box 583399, Minneapolis, MN 55458.
If a bank or credit union denies your application based on information from ChexSystems, the adverse action notice should identify the reporting company and provide contact information so you can request a copy of the report used in the decision.
Once you receive your report, be sure to review it carefully. You’ll want to look for unfamiliar accounts, incorrect balances, inaccurate dates, or other information that does not belong to you. If you find an error, you have the right to dispute it.
Recommended: What to Do When There Is a Bank Error Made in Your Favor
How to Clean Up Your ChexSystems Report
If your ChexSystems report contains inaccurate or incomplete information, you can dispute it with ChexSystems and the bank or credit union that provided the information. Providing supporting documentation, such as account statements or proof of payment, may help with the investigation.
ChexSystems says that reinvestigations are generally completed within 30 days, although there are some exceptions. If the information cannot be verified or is found to be inaccurate, it may be corrected or removed.
If the negative information is accurate, paying or settling the amount you owe may still be worthwhile. Contact the bank or credit union that reported the information to determine how to resolve the balance. After you pay or settle the account, keep documentation showing the payment. The financial institution can update the account’s status with ChexSystems, but it generally is not required to remove accurate information before the applicable retention period ends.
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Does a ChexSystems Report Affect Your Credit Score?
A ChexSystems report is separate from your traditional credit report and does not directly determine your FICO® or VantageScore® credit scores. ChexSystems focuses primarily on checking and savings account history, while the major credit bureaus collect information about credit accounts, such as loans and credit cards.
ChexSystems also has its own Consumer Score, which ranges from 100 to 899, with a higher score indicating lower risk. However, financial institutions may use different scoring models or may consider the report itself along with other information when evaluating an application.
There can be an indirect connection between your banking history and credit. For example, if you leave a negative balance unpaid and the debt is later sent to a collection agency, the collection account could potentially be reported to a traditional credit bureau and affect your credit history.
Options if You’ve Been Denied a Bank Account Due to ChexSystems
If you’ve been denied a checking account because of information in your ChexSystems report, you have several options.
• Review and address your ChexSystems report. Request a copy of your report and look for errors or unfamiliar information. Dispute inaccurate information with ChexSystems and the financial institution that supplied it. If you have an accurate unpaid balance, consider resolving it and asking the financial institution to update the account’s status.
• Consider a second-chance bank account. Some banks and credit unions offer checking accounts designed for consumers who have had problems with previous accounts. These accounts may have additional fees, restrictions, or other requirements, but they can provide access to basic banking services while you work to establish a positive account history.
• Consider a prepaid debit card. A prepaid debit card allows you to load money onto the card and use that balance for purchases or cash withdrawals. It’s not a checking account and generally does not provide all of the services associated with one, but it may provide an alternative for everyday spending. Some prepaid cards also offer direct deposit. Be sure to compare fees and features carefully before choosing one.
The Takeaway
ChexSystems is a specialty consumer reporting agency that collects information about checking and savings account activity and provides reports that banks and credit unions may use when evaluating new account applications. Negative information, such as an involuntary account closure or unpaid balance, can make it more difficult to open a new account, although ChexSystems itself does not make the approval decision.
You can request a free ChexSystems consumer disclosure report at least once every 12 months and dispute information you believe is inaccurate or incomplete. If negative information is accurate, paying or settling an outstanding balance may allow the account’s status to be updated, although it generally will not result in immediate removal of the information. Understanding what’s in your report can help you address problems and explore your banking options.
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FAQ
What happens if you are on ChexSystems?
Being in ChexSystems does not automatically prevent you from opening a bank account. However, if your report contains negative information, such as an unpaid balance from a previous account or an involuntary account closure, a bank or credit union may deny your application or offer different account options. ChexSystems does not make the decision; each financial institution sets its own policies. If you are denied because of information in your ChexSystems report, you can request a copy of the report, review it for errors, and dispute inaccurate information.
Can you remove yourself from ChexSystems?
You generally cannot remove yourself from ChexSystems simply by requesting that your file be deleted. If your report contains inaccurate or incomplete information, you can dispute it with ChexSystems and the financial institution that provided the information. Accurate negative information generally remains for the applicable reporting period, although paying or settling a debt may allow its status to be updated. ChexSystems generally retains reported information for five years. Once information reaches the end of its retention period, it should no longer appear on your report.
How do I know if I am in ChexSystems?
The easiest way to find out is to request a copy of your ChexSystems consumer disclosure report. You are entitled to a free report at least once every 12 months, and you may qualify for additional free reports in certain circumstances. Your report will show information ChexSystems has in its file about you. You can request your report online through ChexSystems, by phone, or by mail. If a bank denied your account application based on ChexSystems information, the adverse action notice should also tell you how to contact ChexSystems.
How long does a person stay in ChexSystems?
ChexSystems generally retains reported information for five years from the report date. However, not every account or banking activity is reported to ChexSystems, and some information may be removed sooner in certain circumstances. Paying or settling an accurate debt does not necessarily remove it from your report, although the account’s status may be updated to show that it has been paid or settled. If you believe information should no longer appear on your report, you can request a copy and dispute information that is inaccurate or outdated.
Which banks do not use ChexSystems?
Some banks and credit unions may not use ChexSystems when evaluating new account applications, while others may use ChexSystems but have more flexible approval policies. Because financial institutions can change their account-screening practices, there is no permanent list of banks that never use ChexSystems. If you have a negative ChexSystems record, look for financial institutions that advertise second-chance checking or accounts that do not use ChexSystems. Before applying, check the institution’s current account requirements and whether it reviews ChexSystems or another specialty consumer reporting agency.
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