Banking » Guides » Chexsystems Explained: A Guide for Consumers
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Chexsystems Explained: A Guide for Consumers

ChexSystems is a reporting agency that gathers information about previous issues with bank accounts, which is used by banks and credit union
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Table Of Content

What Is Chexsystems?

ChexSystems is a reporting agency that gathers information about previous issues with savings and checking deposit accounts. It maintains a report of your banking activities. Credit unions and banks can use the report to establish whether to approve your new savings or checking account application.

Therefore, banks check your ChexSystems report if you want to open a savings or checking account. The agency was created under the Fair Credit Reporting Act. It is mandated to collect and report information about checking, and savings account to credit unions, banks, and other organizations that may ask for it. 

Here are another 3 things to be aware of:

  • The ChexSystems report helps financial entities to evaluate the risk of allowing new clients to open bank accounts. Therefore, if you have a history of bounced checks, negative balances, unpaid overdrafts, and other fees, the bank may refuse to open your account.
  • Most people are not aware of the existence of this report and only find out after not being approved to open a bank account.
  • Unlike credit bureaus, ChexSystems only contain negative information. Therefore, banks and credit unions checking ChexSystems are looking for irregularities in the previous banking relationship.

How Does ChexSystems Work?

The reporting agency tracks your checking and savings account activity. It generates a report for financial institutions that shows your activities and the reasons for closing your previous account. Other banking activities may land on your ChexSystems report, such as:

  • Suspicious activity
  • Repeated overdrafts
  • Failure to pay account fees
  • Fraud
  • Customers' errors
  • Involuntary account closure
  • Bounced checks
  • ATM abuse

If you have a history of closing bank accounts for negative reasons, your information stays on the ChexSystems report for five years. Anytime you apply for a new checking or savings account, the financial institution checks your ChexSystems report. This helps in determining whether to approve your application or decline it.

Financial institutions are under no duty to reveal your ChexSystems report until an account is denied as a result of information in the report.If the report shows financial activities that depict you as a risky client, financial entities may decline your request to open a bank account.

If your request to open an account is denied, the financial institution must disclose the reason for the denial.

You can open a second-chance bank account if a bank does not approve your request to open a regular one. Such accounts are meant for clients who cannot be approved for regular accounts due to issues with their ChexSystems report. However, such accounts may offer limited services or charge fees.

The Fair Credit Reporting Act (FCRA) allows you to access your report every year for free. Also, you can get a free copy if you have been denied an account in the last two months.

ChexSystems report
Financial institution checks your ChexSystems report when you open a new savings or checking. (Photo by Fariz Alikishibayov/Shutterstock)

How to Get a Your ChexSystems Report?

Most people do not have issues that require them to investigate their ChexSystems report. If you are always able to open a new bank account without declines, it is an indication that your ChexSystems report is good.

Although FCRA allows individuals to get their reports for free every year, you might be wondering how you can get the ChexSystems report.

The process of getting a copy of your ChexSystems report is easy. Here are the different ways through which you can get your ChexSystems report.

  • Online: You can visit the agency's website and request your ChexSystems report.
  • Over the phone. You can call the agency and request a copy of your report.
  • Mail: You can get your report by downloading and mailing a request form to the agency.
  • Fax: Also, you can download n fax a request form to the agency to send you a copy of your report.

Once you request, the agency mails you a copy within five business days. You get fast responses when you request online or through the phone.

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Can I See My ChexSystems Report Online?

Previously, you could request your ChexSystems report online and have it sent to your email after nearly ten business days. However, you can now request the report, receive it online, and save it.

Having a copy of your report can be useful in opening accounts in ChexSystems-sensitive financial institutions.

How to Clear up a ChexSystems Report

Like credit reports, your ChexSystems report can also be outdated or contain errors. You can clear up your report if your application to open a bank account was denied or if you want to remove outdated or incorrect information

Here are the ways of clearing up your report.

  1. Get a copy of the report. You can get your ChexSystems report using the different ways mentioned earlier. Check the activities on the report to identify the existing debts.
  2. Clear the debts. Pay off the debts if you have any negative balance or outstanding fees. If you cannot clear the amount owed, negotiate a repayment plan and stick to it. Alternatively, you can ask the bank if you can pay less than what you owe. After paying, ask for proof.
  3. Removal of negative information. After repaying the debts, ask the financial institutions to update your report. Once it is updated, get a copy and document it. A clean record should qualify you to open a bank account.
  4. File a lawsuit (Not Necessary In Most Cases) You can start clearing up your report by filing a complaint with the state attorney. Also, as a last resort, you can file a lawsuit against a financial institution or agency.
Clear up a ChexSystems Report
You can clear up your report, just make sure to pay off your debts before removal. (Photo by fizkes/Shutterstock)

How Long Do You Stay In ChexSystems?

Your negative banking information stays in ChexSystems for five years. However, some information may be reported for up to seven years.

Therefore, if problems prevent you from opening a bank account, the reporting agency will alert financial institutions about them for 5-7 years.

How to Dispute Errors on ChexSystems?

You can dispute your ChexSystems report if you find fraudulent or erroneous information on it. Before disputing the errors, gather all the supporting information, for example, bank statements.

After gathering the information, you can dispute the errors by phone, mail, or online.

  • Online: You can dispute errors on your report by visiting the ChexSystems website and navigating to the Dispute Information section. You will be redirected to fill out a form, upload supporting documents, and submit.
  • By phone. If you have a copy of your report, speak to the agency's representative at 800-513-7125. This method is ideal if there are no supporting documents to submit.However, you cannot dispute errors relating to fraud by phone.
  • Fax or mail. This method involves visiting the agency's website and requesting an investigation form. Print it out and fill in the necessary information, and include copies of supporting documents. You can fax or send the files to the agency's address.

After disputing the errors, you can let the agency reach out to the financial institution that reported the erroneous information on your behalf or do it yourself.

The agency and the financial institutions research the dispute within a month. If they confirm the information is wrong, they correct it. You can add a brief to your report if you are not satisfied.

Does a ChexSystems Report Affect Your Credit?

A ChexSystems report does not affect credit directly. However, if your request to open an account was previously denied, it could indicate that you had difficulties in the past. This may affect your credit history.

If you have a negative balance on your bank account, the debt collection agency may report to the credit bureaus, which can adversely affect your score.

Therefore, you need to check your credit regularly to know the status and what you can do to improve your credit history and general financial wellness.

What Are My Alternatives if I've Been Denied a Checking Account?

If you have applied for a new bank account and it has been denied, you can explore the following alternatives.

  • Second-chance checking account. Some banks offer alternative checking accounts if you cannot open a regular one. Such accounts do not have the same features as regular bank accounts. For example, they do not have overdraft protection, and some may charge higher fees.
  • Prepaid debit card. You can stay banked by using a prepaid card to take advantage of some banking functions, such as bill payments.

Also, you can deposit checks to special accounts linked to your prepaid card using ATMs or mobile banking.

FAQs

The banks that don't use ChexSystems are Chime, Current, U.S Bank, Axos, United, FSNB, and Renasant bank. Others are Republic, Liberty Savings, Cadence, and Bank OZK.

Banks that do not use ChexSystems can allow you to open an account even if you have negative banking information.

Yes. Wells Fargo uses ChexSystems. This implies that the bank will deny your application to open an account if your report contains negative information.

Wells Fargo offers second-chance checking accounts to clients who cannot open regular accounts.

Yes. Chase uses ChexSystems and will not approve your application for a new account if you have a bad banking history.

If you find yourself in such a situation, Chase offers a second chance account as an alternative. The use of second-chance accounts can help you build your banking history.

Yes. Bank of America uses ChexSystems. Therefore, if you are considering opening an account at Bank of America, you must clear up your report before opening the account.

Alternatively, the bank offers a second chance checking account for its clients.

Credit unions use ChexSystems to establish whether an individual is a desirable client.

If you have gotten in trouble with your bank, some credit unions may deny you a chance to open an account.

On the other hand, there are credit unions that do not use ChexSystems or provide services that bypass ChexSystems checks.

Yes, PNC bank uses ChexSystems to check their clients' eligibility before opening checking and savings accounts.

Therefore, opening a regular account at PNC bank is impossible if you do not clear up your report.

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Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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