ChexSystems | Definition

Typically, negative items remain on your ChexSystems report for five years.

If you’ve been denied a checking account by the bank, you’ve probably heard of ChexSystem. That can be an incredibly frustrating experience. If you haven’t experienced this yet, that doesn’t mean you don’t need to understand what ChexSystem is. Just like a credit report, the ChexSystem report is something you should monitor regularly.

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What is ChexSystem?

ChexSystem is a banking reporting agency and  like the three big credit bureaus, it is a company that collects data on your financial behavior. ChexSystem collects financial information  to help banks make decisions. The information, however, is about your bankability, not your credibility. By looking at your ChexSystem report, the bank can determine whether it is risky to give you a checking account.

What is on a ChexSystem Report?

A ChexSystem report, much like a credit report, has a few different components to help a bank determine how risky you are. For example:

• Involuntarily closed accounts
• Bounced checks
• Overdraft fees
• Suspected fraudulent activity
• Account or ATM abuse
• How many accounts you’ve applied for recently
• Unpaid negative balances
• Public records and private information

Every bank or credit union has different criteria they follow for determining your bankability, so while your ChexSystem report might get you denied at one bank, you might still be able to open an account at another. Being denied, however, means you should check your report and take action to fix it quickly to remain bankable.

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How can you check your ChexSystem Report?

Just like your credit report, the ChexSystem report falls under the Fair Credit Reporting Act, which allows you to check your ChexSystem report for free once a year. The easiest way to request a copy of your ChexSystem report is to go to the ChexSystem website and click on the reports tab. They will provide you with your free copy once every 12 months. Reading your ChexSystem report may not be easy, so take your time to understand what each section is saying. Understanding your report can make a huge difference in becoming more bankable.

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What do you do if you’ve been denied at a bank?

Being denied at a bank may feel like the end of your financial life, but that is not the case. There are many steps you can take to get past a bank denial. As mentioned above, the first step is to see if any other bank or credit union will accept you. Try talking to the bank informally. Instead of filling out another application and getting another inquiry added to your ChexSystem report, be upfront with the bank. Tell them why you were denied, show them the report you were given, and see if they can work with you. If not, move on to the next bank. If you can’t find a bank to work with you, then try another approach.

Second, make sure there aren’t any errors in your report. You can do this while you’re looking for another bank. If you are denied due to an error on your report, you need to get this fixed immediately. When you have inaccurate information showing up on your report, the likelihood of a financial institution accepting your application becomes much lower. 

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Third, ask the bank if there are any alternatives called second-chance checking accounts. If banks are denying you, you need to build trust with the bank again. Just like there are credit cards out there to build your credit with higher fees, you can get an alternative account with the bank which usually has higher fees and fewer options to start building your bankability again. You can also apply for a prepaid debit card which lets you build that trust again. These options aren’t ideal, but you have to start somewhere.

Does ChexSystem impact your credit?

Your ChexSystem report is only about your bankability and has nothing to do with your credit. A ding on your credit won’t affect your ChexSystem, and a ding on your ChexSystem won’t affect your credit. But, one thing that is reported to both the credit bureaus and ChexSystem is when an account with a negative balance is sent to collections. A negative balance is kind of like a loan from the bank. So if it goes unpaid, you have basically defaulted on a loan, which is why it is reported on your credit. It is also an involuntary closure of an account that is reported on your ChexSystem. This is to be avoided if possible.

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How do you dispute your ChexSystem Report?

Disputing a ChexSystem report is protected under the Fair Credit Reporting Act, which means that ChexSystem is required to give you a fair look at your dispute. So if you have a dispute, definitely send it in. There are multiple ways to send a dispute:

Online: ChexSystem Dispute

Phone: 800.428.9623

Mail:

You must complete, print and mail the completed Request for Reinvestigation Form found on their website to:

Chex Systems, Inc.

Attn: Consumer Relations

PO Box 583399

Minneapolis, MN 55458

When you are sending a dispute, it is important to remember these rules and disclaimers found on the ChexSystem website:

• You must be 18 years of age or older to communicate with ChexSystems.
• Correspondence must include the consumer’s full name, current address, date of birth, Social Security number, information being disputed, and the specific nature of the dispute.
• Once your request has been received, ChexSystems will mail a response to you.
• You agree to provide accurate identifying information.
• ChexSystems may access, store, and use your identifying information to the extent permitted by law.

The Money Wrap Up

Understanding how the reports banks use to determine how they will interact with you determines how well you are treated by a bank. The riskier you appear, the less likely a bank is to give you good banking options. To build a better relationship with a bank, follow these steps. First, request your ChexSystem report. Second, search the report for errors and start disputing those errors immediately. Third, find a bank that is willing to take a chance on you and start banking responsibly by avoiding overdrafts, bounced checks, negative account balances, and involuntarily closed accounts. By doing this, you will be well on your way to bankability and more financial stability.

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