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What Is ChexSystems, and How Does It Work?


Your credit score matters, especially if you’re planning to buy a house or you want access to the lowest loan interest rates. There are three credit bureaus that keep track of consumer credit data. What many people might not know is that there are also companies that collect information about savings and checking accounts. One such reporting agency is called ChexSystems, and it’s the most commonly used by financial institutions.

What Is ChexSystems?

Believe it or not, you can be turned down when trying to open a new bank account. Even if you’ve spent plenty of time choosing the right checking account, a bank or credit union could reject your application. You could be turned down for a checking account, for example, if you’ve closed accounts in the past for illegitimate reasons or you’ve overdrawn your account on too many occasions.

If your bank denied you a new account, it probably did so after reviewing data from ChexSystems. This is the most common national consumer database in the banking industry, while two others are Telecheck and Early Warning. Most financial institutions rely on ChexSystems. Even some online- and mobile-only banks use their products. But there are some credit unions and banks that don’t.

ChexSystems holds information related to the use of credit, savings and checking accounts. With their data, banks, credit unions and other kinds of financial companies can decide whether certain people are too much of a liability to have access to new accounts. Sometimes credit card companies review ChexSystems data before approving someone for new credit. This is possible because of the Fair Credit Reporting Act, which mandates that the reporting agency keep an accurate record of credit and banking activities.

ChexSystems: Consumer Scores and Reports

What to Know About ChexSystems

Each of the credit reporting bureaus has a different way of rating consumers and assigning them scores that indicate their level of risk to creditors. Similarly, ChexSystems rates bank account holders on a scale of 100 to 899. As is the case with credit scores, it’s better to have a high ChexSystems consumer score. The higher your score, the less of a risk you pose in the eyes of banks.

ChexSystems reports contain information related to consumer banking history. Normally, they hold on to information for up to five years. ChexSystems files contain credit inquiries and details about bounced checks, debts, fraud, past fees and charges that haven’t been paid.

Just like you can view your credit score for free, you can access your ChexSystems report for free on a yearly basis. All you need to do is visit ChexSystems’ website to find out how to get yours online or by mail.

Errors on credit reports can be disputed and so can mistakes on ChexSystems reports. You can either notify the source of the error directly or ask ChexSystems to do it for you. To send a dispute to the company, you can submit one online, through the mail or by fax.

Are You in ChexSystems?

Not everyone has a ChexSystems file. If you’re in really good standing, you might not have a ChexSystems report at all.

Having a negative ChexSystems record doesn’t automatically mean that you won’t be able to get a new personal or business checking account. But it might lower your chances of success in doing so.

Keep in mind that once you’re in the system, everything in your file is locked in for at least five years. You might have to request that ChexSystems remove your negative information after this period of time. If you filed for bankruptcy, your ChexSystems debts could still be in your report, so you might need to make sure they’re deleted.

If you are in ChexSystems, you can boost your score with better banking habits. That includes not overdrawing your account on a regular basis and paying fees on time. Improving your credit can also work in your favor since ChexSystems takes your credit history into account.

What to Do If You Can’t Open a New Bank Account

What to Know About ChexSystems

Establishing a positive credit and debit history can take time. And lower-income Americans in particular have had a hard time getting approved for new accounts once they’re in ChexSystems. If you can’t open a traditional checking account, however, you might be able to apply for a second chance checking account.

Second chance accounts are designed for folks who’ve made mistakes in the past and who are looking for a fresh start. Multiple banks, including PNC Bank and Wells Fargo have them. The catch, though, is that they tend to come with high fees and strict rules.

As an alternative, you can look for online banks or specific accounts that don’t use ChexSystems. Disputing errors in your ChexSystems file as soon as possible is another good idea since it can increase your chances of being able to open an account.

Bottom Line

ChexSystems provides banks, credit unions and credit card issuers with tools that let them screen potential customers. To avoid getting stuck with a low consumer score, it’s best to be careful about the choices you make when banking and applying for credit.

Tips for Managing Your Money

  • Managing your credit and assets be difficult to do on your own, all while maintaining a long-term financial plan. A financial advisor can help with this. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Savings rates are constantly changing with the ebbs and flows of the market. To ensure you’re taking advantage of the top rates currently available, check out SmartAsset’s list of the best savings accounts.

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