ChexSystems is a national consumer-reporting agency, similar to a credit reporting agency like Experian, Equifax or TransUnion. However, instead of tracking credit accounts, ChexSystems keeps track of checking accounts with banks or credit unions
A ChexSystems report contains information that might flag you as a risk, such as a bounced check or a failure to pay a fee. If you’ve been denied a bank account, it’s probably because of your ChexSystems report.
How Do You Find Out if You’re on ChexSystems?
Under the Fair Credit Reporting Act, you have the right to request one free copy of your ChexSystems report every 12 months. You can also request a free copy when a bank refuses to open an account based on information found in your report.
What’s included in a ChexSystems Report?
The ChexSystem report shows items such as unpaid fees, bounced checks and suspected fraud. Here are some other items that can show up on your ChexSystem report:
- Unpaid negative balances, including overdrafts
- Involuntarily account closure
- Suspected fraudulent activity or identity theft
- Number of account inquiries for other bank accounts
- Unpaid fees
- Public records such as liens or bankruptcies
How Long Do You Stay on ChexSystems?
Federal regulations allow consumer reporting agencies to report certain negative information for up to seven years. That being said, most negative items will fall off your ChexSystems report after five years, according to Experian. Banks and credit unions have their own policies about how much time must pass after a negative incident before approving you for a checking account.
How to Clean Up Your Report
If you have a negative report, you can work with ChexSystems to clean it up. This will help you open a standard bank account and avoid resorting to an account with higher fees.
It’s especially important to clean up any inaccurate information you may find. These mistakes can unfairly impact you if they’re not removed.
Follow these five steps to clean up your record if you find inaccurate information on your ChexSystems report.
Step 1: Request Your Report
You can obtain a free copy of your ChexSystems report by visiting the ChexSystems website. If you’re denied an account, the bank or credit union is required to provide you with information about how to receive a report in an adverse action notice.
Step 2: Dispute Errors
To file a dispute with ChexSystems, you can use the contact information provided in your adverse action notice or contact ChexSystems directly. You can submit your dispute through the ChexSystems website, or submit a dispute by mail or fax using a request for investigation form.
If you have documentation to support your dispute, you should upload or attach a copy along with your dispute.
If you have been a victim of identity theft, you can initiate a security freeze on your ChexSystems consumer report. This will prevent someone from opening a new financial account without your authorization.
Step 3: Pay Off Debts
If the negative information in your ChexSystems report is accurate, you should pay the debt. If you aren’t able to make a lump-sum payment, you might be able to set up a payment plan or negotiate a settlement with the bank or debt collection agency.
Step 4: Ask Creditors to Update Your Information
Once the money is paid off, ask the bank or collection agency to report it to ChexSystems. Be sure to get payoff information in writing, and save any receipts or documentation proving that you paid the debt. Send it to ChexSystems and ask them to update your record.
Step 5: Wait Until Your Information Falls Off
Reported information usually falls off your ChexSystems file after five years. If you’re able to remove negative information through the dispute process or by paying off a debt, it’s best to take care of it as soon as possible. Otherwise, your options are limited.
Opening a Second-Chance Bank Account
It’s challenging to manage your personal finances without a bank, especially if you need to pay bills online or have your paycheck directly deposited to your account.
If you attempt to resolve your ChexSystems issues and are not successful, you can apply for a second-chance checking account. Typically, these accounts have higher fees and built-in restrictions to prevent you from overdrawing your account. They allow you to rebuild your checking account history, so that you can eventually get a standard bank account.
Banks That Don’t Use ChexSystems
While most banks and credit unions use ChexSystems reports during the review process for a new account, there are a few banks that either don’t check your ChexSystems report at all, or are more flexible when it comes to a few negative marks.
Here are a few examples:
Credit Reports and ChexSystems
Some banks also look at your credit score and credit reports when you apply for a bank account. Errors on your credit report (like errors on your ChexSystems report) can unfairly prevent you from getting a bank account.
Although we don’t work with ChexSystems, our credit repair services can help you identify errors on your credit report. Lexington Law can help you work to remove errors, allowing you to get back on track toward meeting your financial goals.