Did you know your bank or credit union is reporting information about your banking habits to several consumer reporting agencies?
ChexSystems is one such consumer reporting agency which collects, maintains, reports and produces data about your banking habits and practices.
ChexSystems is not a financial institution but a publicly traded company owned by eFunds, Inc. ChexSystems maintains a vast nationwide database on all consumers who have bank accounts.
ChexSystems database includes checking as well as savings accounts. The database is used by banks, credit unions and other financial institutions to determine if potential customers will be a risk if an account is opened. Once a consumer is reported to ChexSystems, the information provided can remain on a consumer’s ChexSystems report for 5 years.
How much of a risk potential account holders present is determined by a ChexSystems consumer score, much like a credit score. Chexsystems calculates a score ranging from 100 to 899.
Consumers with a low ChexSystems consumer score are viewed as high risk and are often denied a bank account.
Find out what’s in your ChexSystems report, how to get a free ChexSystems report and how to open a new account:
What’s in a Chexsystems Report
Chexsystems is not responsible for the decision made by banks to deny you a bank account; however, the information reported by banks and credit unions and stored by ChexSystems can result in a denial of a bank account.
The following information may be stored in your ChexSystems report:
- Paid and Unpaid insufficient fund items (“NSF”)
- Excessive “NSF” charges, even though you may have covered all of those charges
- Checking account habits that your bank may consider negative
- Any kind of Fraud
- Uncollected overdrafts, ATM transactions or automatic payments the bank paid
- Abuse of Debit Card, Savings Account or ATM Card
- Violation of any banking rules and regulations
- Opening an account with false information
- Delinquent or derogatory credit behavior
- Excessive ChexSystems Inquiries
There may be additional reasons a bank reports their customers to ChexSystems but the above list represents the most common reasons consumers end up in ChexSystems.
Paid ChexSystems Items
The fact that you pay an overdraft or other negative item does not mean ChexSystems will remove you from their database. Once your bank reports you to ChexSystems, the record can remain for 5 years. Even if the account has been closed and you no longer bank at that financial institution, a paid or unpaid ChexSystems item can remain on your record for 5 years.
If you have resolved the issue with the bank make sure your report reads “all amounts owed have been paid” or a “paid status.” The bank which reported you should update your file with ChexSystems but unfortunately this does not always happen. If the resolved matter does not reflect a paid status, contact the bank immediately and request they file an update with ChexSystems.
You are entitled to your ChexSystems Report
ChexSystems is a consumer reporting agency (CRA) and is subject to the Fair Credit Reporting Act (FCRA). Your report can be made available for a fee or under the Fair and Accurate Credit Transaction Act (FACTA) you can get a free copy of your ChexSystems report once every 12-months. For a free copy of your Chexsystems report visit: Chexsystems Consumer Assistance.
You may also get a free report if you have experienced one of the below:
- Denied a bank account due to information in your ChexSystems file.
- You must request this report within 60 day of your denial.
- If you are unemployed and intend to apply for unemployment in the next 60 days.
- If you are on public welfare assistance.
- If you have reason to believe your file contains inaccurate information due to fraud.
Contact Chexsystems at: ChexSystems, 7805 Hudson Road, Woodbury MN 55125-1403, (800)428-9623-tel and (602)659-2197-fax and www.consumerdebit.com. As with your credit files, it is just as important to know what information is contained in ChexSystems about your banking habits.
Disputing Negative ChexSystems Information
If ChexSystems sounds like a credit reporting agency like Experian, Equifax or Transunion — it is. ChexSystems information can be incorrect, inaccurate, erroneous, outdated and may even be a result of identity theft. All of these circumstances can result in a denial by a bank or credit union.
Because ChexSystems is a consumer reporting agency like the traditional credit bureaus, negative information can be disputed. It may be worth disputing negative information to clear your name before the 5 year reporting period ends.
Can I Still Get a Bank Account?
A ChexSystems report may not prevent you from opening a new bank account. Some banks and credit unions rely upon other means such as running a credit report to open a bank account. But be careful. While you may be able to open a bank account while in ChexSystems, the bank’s loss prevention department can come back at a later date and close the account.
A bank’s loss prevention department can run “sweeps” on accounts and if any accounts are discovered to be in ChexSystems (paid or unpaid), the account may be closed. When a bank closes your accounts due to “sweeps”, it may take up to 30 days for any monies to be returned to you.
Second Chance Banking
There are a few banks which allow consumers with ChexSystems records to open bank accounts under a “second chance banking” program. Second chance bank accounts usually have stricter standards which may mean your deposits are held longer or you may have limited checking writing privileges until you prove you can manage a bank account. Find Second Chance Banks here.
Non ChexSystems Banks
Consumers with multiple ChexSystems records may find it exceptionally difficult to get a new bank account, even if the item has been paid. A Non-Chexsystems bank account may be the only option. But keep in mind, they must be able to verify your identity; therefore, a credit report may be pulled. Find Non-ChexSystems banks here.
Open a brokerage account like Scottrade which will then allow you to open a regular bank account at Scottrade Bank. To open a Scottrade bank account you must first open a Scottrade individual brokerage account with a minimum of $500. Once the brokerage account is open you can transfer the money to open a checking account at Scottrade Bank.
Customers get free checking, direct deposit, online bill pay, free checks and ATM fee reimbursement. To open a checking account a deposit of $100 is required. You can transfer the money from your Scottrade brokerage account.
Now that you have a little information on Chexsystems, find out about Early Warning Services, it may be another reason why you were denied a bank account.