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What is ChexSystems? A Complete Guide

Choncé Maddox • March 13, 2024

Examining a ChexSystems report and bank profile

If you’re looking to switch banks, it’s common to submit an application first. During the application process, the bank may use ChexSystems to learn about any negative past banking history.

If you’re wondering what ChexSystems is or how it affects you directly, you’re in the right place. Find out more about ChexSystems Inc., how to access your report if you have one, and how to open an account without worrying about ChexSystems.

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What is ChexSystems and how does it work?

ChexSystems is a consumer reporting agency (CRA) that banks and credit unions use to determine whether they want someone to be a potential customer.

A CRA reviews risks for people who routinely mismanage their bank accounts. ChexSystems operates similarly to a credit report, except it focuses solely on banking history.

  • A key difference between ChexSystems and the credit bureaus is that ChexSystems generally only lists negative information in your report so financial institutions can use those details when considering new account applications. So, for example, if you’ve only had one overdraft charge, it’s possible that it’s the only item listed on your ChexSystems report when you try to open a new bank account (even if you’re an otherwise perfect banking customer).
  • ChexSystems also only collects information on closed bank accounts, not on active bank or credit accounts like credit cards or loans.

What is a ChexSystems report?

A ChexSystems report is similar to a credit report, including information about your past financial activities. Instead of listing information that would be on your credit report, like credit utilization and history, ChexSystems collects information about your checking and savings account history. ChexSystems will typically have negative information on record for five years.¹

ChexSystems reports keep track of your bank deposit accounts, your account activity, and why accounts were closed. Whenever you apply for a new checking or savings account, the bank or credit union will check your ChexSystems report to determine whether to accept you as a new customer.

What is on a ChexSystems report?

Your ChexSystems report is, in essence, a compiled file of your banking behavior from the past five years. Specifically, it outlines:

  • Any unpaid fees or negative account balances
  • Instances of bounced checks or overdrafts
  • Accounts closed by you or the bank, including the reason for the closure
  • Any suspected identity theft or fraudulent bank activity
  • Inquiries into your ChexSystems report, typically from bank account applications²

The report’s primary function is to help financial institutions predict the behavior of potential customers before opening a new checking account. Just like a good credit score can help get more favorable lending terms and a lower APY, a clean ChexSystems report can give you hassle-free access to the most fundamental banking tools.

How to know if you have a ChexSystems report

If you’ve never had an issue before when opening a bank account, you probably have never thought about having a ChexSystems consumer disclosure report or file.

If you have a bank account that’s in good standing and have yet to be denied when opening a new one, you’re probably in good shape. But it’s always smart to be sure.

Getting a copy of your ChexSystems report

You are legally entitled to one free copy of ChexSystems report per year under the Federal Fair Credit Reporting Act.³ Upon receiving your report, carefully review the details to ensure everything is accurate. You can also cross-check the report with your own banking records. Anything that shows up on your report can lead to you having to apply for a second-chance checking account or having higher monthly fees.

Here are a few options to request a copy of your report:

  • Online through the ChexSystems website
  • By calling 800-428-9623 during business hours from 8 am to 7 pm CT on regular business days (Monday to Friday)⁴
  • By mail via a request form to ChexSystems Inc., Attn: Customer Relations, P.O. Box 583399 Minneapolis, MN 55458
  • Hearing-impaired consumers can use TDD Relay Operator by calling 7-1-1 and referring the operator to 800-428-9623
  • Visually-impaired consumers can call 855-472-2911 to request a report in Braille, large print, or audio CD⁴

If you’re submitting a request for a minor, you must be at least 18 years old and have a copy of the minor’s birth certificate and social security card along with your driver’s license or state ID.⁴

How to dispute your ChexSystems report

If you spot an error, you have the right to submit a dispute directly to the source of any inaccurate information on your ChexSystems report or call ChexSystems at (800) 428-9623 to have them contact the source to open an investigation.⁵

Once a dispute is filed, the agency is required to investigate it and find out if there is incorrect information. Investigations are usually completed within 30 days.⁶

After the investigation, ChexSystems will notify you in writing of the results. This doesn’t guarantee that the negative information will be removed or corrected, but it’s worth trying if you believe there is, in fact, an error on your report.

You can also clear your ChexSystems report by cleaning up your record before opening a new bank account.

 

Do Chexsystems reports affect your credit score?

Under most circumstances, your ChexSystems report does not affect your credit score. ChexSystems is concerned with your banking history, while credit reporting agencies focus on your borrowing habits. Negative ChexSystems entries do not directly influence your credit score but can affect your financial standing in other ways.

However, a damaged ChexSystems report may indirectly affect your credit score. If you have a large debt due to overdrafts or are unable to open a bank account because of issues in your ChexSystems record, you may resort to riskier financial products, like payday loans or prepaid debit cards.

These alternatives can negatively affect your credit score, especially if your bank account gets sent to collections.

Are there banks that don’t use ChexSystems?

There are many financial institutions that don’t use ChexSystems reports when new customers try to open an account, including Chime.

To find more options that don’t use ChexSystems, shop around or do some research online. Most places will list this information on their website, but if you can’t seem to locate it, you can call a physical location or a customer service number to double-check.

What can you do if you’re denied a bank account?

There are solutions to explore if you’re denied a bank account because of a negative ChexSystems report. Understanding how the process works and what your current account options are can help you progress toward better money management.

Second-chance checking accounts are offered to those denied regular accounts due to having a lower ChexSystems consumer score. Some banks and online institutions will offer these types of accounts with online banking to help people get back on track with their finances, including Chime.

Another option is to use a prepaid debit card. These cards allow you to load money and then withdraw cash or make purchases like a regular debit card. The difference is that a prepaid debit card isn’t attached to a bank account and may also come with some extra fees.⁷

Sign up for Chime for a second chance banking experience that offers no credit check, no ChexSystems, and no monthly fees.

Set yourself up for banking success

While ChexSystems plays an important role in determining which bank account you can get, it doesn’t have to stop your mission to improve your financial circumstances.

Switching to Chime can help you avoid ChexSystems while offering early access to your direct deposit, 60,000+ locations for ATM withdrawals, and overdraft protection.

FAQs

How long does it take to be removed from ChexSystems?

ChexSystems only keeps reports for up to five years, even though federal regulations do allow the files to be kept for up to seven years.⁸

Does a ChexSystems report affect my credit score?

A ChexSystems report essentially has no effect on your credit score. However, if you have any outstanding or negative bank account balance that could be sent to collections, that would be viewed as a debt that will inevitably impact your score. It’s always a good idea to stay on top of your credit report, which you can do by requesting a free copy of it online or by using a credit monitoring service.

What is a ChexSystems security freeze?

A ChexSystems security freeze is when you freeze your report to stop the agency from releasing your personal information without your consent or authorization.⁹ Doing this prevents other people from opening a new account or line of credit in your name or pretending to be you. ChexSystems implements this process and lets consumers initiate a freeze to help prevent identity theft and fraud.

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Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank, N.A. and Stride Bank, N.A. (“Banks”). Banks are not responsible for the accuracy of any content provided by author(s) or contributor(s).

¹ Information from ChexSystems' "Frequently Asked Questions" as of March 1, 2024: https://www.chexsystems.com/answers-to-frequently-asked-questions

² Information from Cosumer Financial Protection Bureau's "ChexSystems" as of March 1, 2024: https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/consumer-reporting-companies/companies-list/chex-systems

³ Information from ChexSystems' "Home Page" as of March 1, 2024: https://www.chexsystems.com/

⁴ Information from ChexSystems' "Request Consumer Score Reports" as of March 1, 2024: https://www.chexsystems.com/request-reports/consumer-score

⁵ Information from ChexSystems' "Dispute Page" as of March 6, 2024: https://www.chexsystems.com/dispute

⁶ Information from ChexSystems' "Dispute Page" as of March 6, 2024: https://www.chexsystems.com/dispute

⁷ Information from Consumer Financial Protection Bureau's "What Type of Fees Do Prepaid Cards Typically Charge?" as of March 1, 2024: https://www.consumerfinance.gov/ask-cfpb/what-types-of-fees-do-prepaid-cards-typically-charge-en-2053/

⁸ Information from ChexSystems' "Frequently Asked Questions" as of March 6, 2024: https://www.chexsystems.com/answers-to-frequently-asked-questions

⁹ Information from ChexSystems' "Security Freeze Information" as of March 6, 2024: https://www.chexsystems.com/security-freeze/information

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