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Banking Basics

A Guide to ChexSystems: What to Do If You’re Listed

ChexSystems is an agency that most banks use to track new customers’ previous banking history to see if they’ve mishandled their accounts. A negative report can disturb your financial situation and follow you for several years. Read on to find out how you can avoid a negative file and what to do if you’re listed.

Lindsay VanSomeren • June 20, 2018

In This Article

  1. What is ChexSystems and how does it work?
  2. ​​What is a ChexSystems report?
  3. How to know if you have a ChexSystems report
  4. How to review your ChexSystems report
  5. How to dispute your ChexSystems report
  6. Are there banks that don’t use ChexSystems?
  7. FAQs
  8. Final thoughts

Picture this: You’re looking to switch banks, so you take a trip to a new bank and are waiting in line to open an account. You then chat with the friendly teller, giving them the information needed to open an account, along with your ID. After a few minutes, the teller tells you that the bank can’t offer you an account at this time.

What gives? Your head might start spinning, wondering what the problem is. However, in reality, this happens every day to many people. It may have to do with one consumer reporting agency (CRA): ChexSystems.

Read on to learn more about ChexSystems, what to do if you’re listed, and how to open a bank account without worrying about ChexSystems.

What is ChexSystems and how does it work?

ChexSystems is a consumer reporting agency (CRA) that banks and credit unions typically use to determine whether a person is a desirable potential customer, as a CRA assesses risks for those who routinely misuse or mismanage their bank accounts. ChexSystems operates just like credit bureaus such as Equifax, Experian, and TransUnion. Except, in this case, ChexSystems collects data about how you’ve used your past bank accounts rather than how you’ve handled your credit. 

Another key difference between ChexSystems and the credit bureaus is that ChexSystems generally only lists negative information on your report. So, even if you’ve only had one overdraft charge, it’s possible that it’s the only thing listed on your ChexSystems report (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, such as credit cards or loans.

​​What is a ChexSystems report?

A ChexSystems report is similar to a credit report in that it includes 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 5 years.

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

What is on a ChexSystems report?

You may be wondering what exactly is listed on your ChexSystems file. Here are some examples of what is on your report:

  • Personal information (name, address, Social Security number, etc.)
  • Unpaid bank or overdraft fees
  • Unpaid negative balances 
  • Involuntary account closures 
  • Fraudulent activity (from the account holder or an outside source)
  • Identify theft 
  • Recent bank account inquiries 

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 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 good to be sure. 

How to review your ChexSystems report

The Fair Credit Reporting Act (FCRA) allows you to access your ChexSystems report for free once every 12 months. You can request a copy of your report online or ask for it to be sent by fax or mail. After you have a copy of your report, it’s best to read it thoroughly to ensure there are no mistakes. It’s also a good idea to check your report year after year to make sure there’s no fraud or errors listed on it, especially if you plan to open a new account.  

If you have a file with negative items on it, details about those past closed accounts will be provided. Remember, checking your report once a year doesn’t hurt as it makes sure the information is always up to date and that your reputation is clean.

If you do apply for a bank account and are denied based on what the bank saw in your ChexSystems report, you can also get another copy for free to make sure it’s accurate. If you do find an error, you have the right to dispute it.

How to dispute your ChexSystems report

If you spot an error, you can resolve it by contacting your bank and ChexSystems to file a dispute. Once a dispute is filed through the ChexSystems website, the agency is required to investigate it and find out if the information is actually incorrect. Investigations are usually completed within 30 days.

After the investigation is complete, 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.

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. For a list of places that don’t use ChexSystems, you can 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 who’ve been denied regular accounts to support a healthy financial history. Some banks and online institutions will offer these types of accounts to help people get back on track with their finances. Consumers are typically guaranteed approval as most banks understand these accounts are for individuals who need some work managing their money. 

Another option is to use a prepaid debit card. These cards allow you to load money and then withdraw cash or make purchases the way you would with a regular debit card. The difference is that a prepaid debit card isn’t attached to a bank account. 

Check This Out

Chimeoffers accounts that don’t review your ChexSystems reports or require a minimum deposit!

FAQs

How long does it take to be removed from ChexSystems?

ChexSystems only keeps reports for up to 5 years, even though federal regulations do allow the files to be kept for up to 7.

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. 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. 

Final thoughts

Not being able to open a bank account can be stressful, but don’t let it stop your mission to improve your financial circumstances. Reviewing your ChexSystems report to identify areas you can work on to get approved is a positive first step. Consider making the switch to Chime to positively impact your financial situation and help get your reputation back on track!

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