What is ChexSystems? | Banking advice

When you want to borrow money, lenders will check your credit to see if you are a reliable borrower. Similarly, if you want to open a checking or savings account, banks will look at another report: your ChexSystems report.

ChexSystems is a consumer credit reporting agency. It was created under the federal Fair Credit Reporting Act. The agency collects information on closed checking and savings accounts and forwards this information to banks, credit unions and certain other entities that request it.

The purpose of ChexSystems reports is to help financial institutions assess the risk of allowing new customers to open bank accounts. If a person has a history of unpaid charges, overdrafts, or other problems, the bank may deny the consumer an account. In fact, most people only find out they have a ChexSystems report if they get rejected for a bank account, according to Leslie Tayne, a debt relief attorney and founder of the Tayne Law Group in New York.

What do banks look for in a ChexSystems report?

“Banks and credit unions look for irregularities in previous banking relationships — things like overdrafts, bad checks, negative balances, and even how often accounts are opened and closed,” says Matt Bundrick, co. -founder of BankBonus.com. He notes that, unlike the credit bureaus, ChexSystems’ reports contain only negative information.

The good news is that if you’ve made a mistake in the past, it won’t necessarily work against you. Many people have accidentally overdrafted their account or bounced a check before. Banks are more interested in capturing patterns that indicate persistent issues.

Also remember that ChexSystems reports the reasons why your old accounts were closed. Activity for accounts that are currently open and in good standing does not appear on your report.

Finally, entries on your ChexSystems reports typically only stay for five years. After that, banks will no longer be able to see past issues with old accounts.

Can you see your ChexSystems report?

Just as you can view your credit reports for free, you can also view your ChexSystems report. You are entitled to see a copy of your ChexSystems report once every 12 months. Additionally, you can get a copy of your report if you have been denied a checking or savings account in the past 60 days. In this case, the bank must also provide the reason why you were refused.

There are several ways to request a copy of your report. First, you can do it on the ChexSystems website, where you have the option of receiving your copy electronically or by post. You can also request a copy by calling 800-428-9623. Finally, you can download the application form and fax it to 602-659-2197 or mail it to the following address:

ChexSystems Inc.
Attention: Consumer Relations
7805 Hudson Road, Suite 100
Woodbury, Minnesota 55125

Once ChexSystems receives your request, your copy should arrive within five business days. Note that checking your own ChexSystems report does not affect your credit.

How can you clear your ChexSystems report?

Five years is a long time to wait for negative entries to disappear from your report. In the meantime, you may find it difficult to open new bank accounts. You may be wondering if it is possible to clean up your report.

There are several things you can do to clear your ChexSystems report. First, if the report indicates that you still owe money to institutions, you must pay the balance owing. Then you can ask the bank to update your report to show that your account is paid in full. Or you can send a receipt directly to ChexSystems and have your report updated.

In some cases, your negative report could be due to an error and not an error on your part. “Like checking your credit report, you need to be on the lookout for incorrect information,” says Bundrick. “You have the right to dispute any items in your ChexSystems report, either directly with the bank or credit union, or through ChexSystems Online Dispute Process.” Investigations are usually completed within 30 days.

What are your options if you are denied an account because of ChexSystems?

If you are denied a bank account due to a negative ChexSystems report, you have a few options. First, you can search for banks that do not use ChexSystems reports. However, this may limit your options.

“Another option is to ask the financial institution if they offer a second chance checking account, which is a special account that some banks offer to those who have defaults on their credit report/ChexSystems report,” Tayne explains. Eventually, after responsibly managing your second chance account, you should be able to open a regular bank account.

However, Tayne notes that second-chance accounts can have higher fees than traditional bank accounts. “So be sure to read the fine print before signing up,” she says. Still, a second chance account is almost always a better option than expensive prepaid debit cards or check cashing services.

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