ChexSystems is a specialty consumer reporting agency that collects data about your banking activity. Many financial institutions review your ChexSystems report when you apply for an account with them. If there are negative items on your report, you may have trouble opening a bank account.
Understanding ChexSystems
ChexSystems records information on closed checking and savings accounts, specifically those closed by the bank for negative reasons. It compiles this information into consumer disclosure reports. Financial institutions and other types of companies with a legitimate reason to see your disclosure report can request it from ChexSystems and learn about your banking history.
Just like the credit bureaus that prepare reports of your credit history, ChexSystems is governed by the Fair Credit Reporting Act (FCRA). The FCRA provides guidelines for when ChexSystems can disclose your consumer disclosure report to third parties that request it.
How ChexSystems reports work
A ChexSystems consumer disclosure report has personal information, including your name, address, phone number, and date of birth, as well as negative items related to closed bank accounts. Here are examples of items that could be on a ChexSystems report:
- Suspected fraudulent activity or identity theft
- Reports of forcibly closed bank accounts
- Overdrafts
- Bounced checks
- Closed accounts with unpaid negative balances
- Numerous recent account applications
Negative information typically stays on the report for five years. If your ChexSystems report contains any negative items, that could cause banks to deny you for an account.
The FCRA entitles you to one free copy of your ChexSystems report at least every 12 months. There are multiple ways to request a free copy of your consumer disclosure report, including through the ChexSystems website, by phone, or by mail. Once you have your report, you can review whether all the information is accurate.
How to dispute an item on your ChexSystems report
If you think any information on your consumer disclosure report is inaccurate or it was due to identity theft and not your fault, you can dispute it directly with the source of the information. The name, address, and possibly the telephone number of the bank that provided the information will be listed in the report.
Alternatively, you can submit a dispute through ChexSystems, and it will reach out to the source on your behalf for a reinvestigation. Dispute requests through ChexSystems are available through its website, by phone, and by mail.
During the dispute process, you have the option to provide supporting documentation, such as police reports or affidavits showing you were the victim of identity theft. You're not required to provide anything, but it could help your case.
ChexSystems usually completes reinvestigations of disputes within 30 days and will notify you of the results. If your dispute is successful, ChexSystems will remove the negative item from your report.
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Denials due to ChexSystems
It's common for banks and credit unions to review the ChexSystems report of prospective clients. Red flags in this report are one reason banking applications get denied. For example, if you had a negative balance in a closed bank account, the bank could report that to ChexSystems. There are a couple of potential solutions if your ChexSystems report is making it hard to get a bank account.
You could try to resolve the issue with the bank that reported the negative item. For example, if you have an unpaid balance, you could offer to settle the debt in exchange for the bank either removing the information it reported to ChexSystems or filing an update stating you resolved the issue.
Another option is to apply for a second-chance bank account designed specifically for people who don't have spotless ChexSystems records.
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