What Is ChexSystems?
Kailey is an industry specialist covering bank accounts, credit cards, and all things personal finance. Her work has appeared on USA Today, CNN Money, Fox Business, and MSN Money.
ChexSystems is a reporting agency that collects information about checking and savings accounts you’ve held in your name. When you apply for a new account, the bank or credit union may consider your ChexSystems report before approval.
Most people are at least familiar with the idea of credit scores and reports. There are three major credit bureaus that issue credit reports showing how you've handled borrowed money over the last several years. Lenders use those reports to decide whether to do business with you. But your credit reports look only at loans and credit cards. What about your checking and savings account history? That’s where ChexSystems comes in.
A ChexSystems report serves the same function as a credit report, letting banks know whether you've been responsible with your checking and savings accounts in the past. If you've overdrawn an account several times or skipped out on fees, a less favorable ChexSystems report may make it hard for you to get approved for new bank accounts in the future.
Not all banks and credit unions use ChexSystems, but many of them do. Regardless, it pays to understand how ChexSystems works.
What’s in a ChexSystems report?
Your ChexSystems report focuses primarily on any negative marks associated with your current or past bank accounts, but there's other information included as well. Here's what you'll find in a ChexSystems report:
- Identifying information: Just like a credit report, your ChexSystems report contains some basic identifying information, such as your name, address, phone number, and date of birth.
- Involuntary account closures: If a bank closes your account because you used it to commit fraud or you wrote a number of bad checks, it will report this to ChexSystems.
- Bounced checks and/or overdrafts: Your bank may not report you to ChexSystems for a single bounced check or overdraft charge, but if it happens several times, you'll likely get a black mark on your report.
- Unpaid negative balances: If you owe bank fees, such as monthly maintenance or overdraft fees, and don't pay in a timely fashion, your bank will report you to ChexSystems along with sending you to collections.
- Debit card and ATM misuse: Frequently exceeding your debit card's daily transaction limit or trying to deposit empty envelopes at an ATM will result in a card misuse notice on your report.
- Excessive account applications: Attempting to open several new bank accounts within a short period of time will raise some red flags and may make banks think you're trying to commit fraud.
- Excessive debit card or check replacements: Losing your debit card or checkbook once is fine, but if you do so multiple times, your bank may get suspicious.
If you're not using your bank account to rob people of their hard-earned cash and avoid overdrafts and writing bad checks, you shouldn't have too much to worry about on your ChexSystems report.
What is a ChexSystems score?
ChexSystems reports come with their own QualiFile scores, which are similar to credit scores. They range from 100 to 899, with a higher score being better. A lower score suggests a greater risk of fraud or failure to keep up with your payments.
Every bank sets its own rules about what it considers an acceptable score. Individuals who fall below a bank's minimum acceptable score may not be able to open a new account or may have to open a second-chance bank account, which we'll discuss below.
It's possible to raise your ChexSystems score by working to clear up the negative marks on your report, but this takes time. Most of the information on your ChexSystems report stays there for about five years, so if the negative marks listed there are legitimate, you may have to wait for them to drop off before you can open a new account at a bank that uses ChexSystems.
How do I get my ChexSystems report?
ChexSystems is legally required to give you a free copy of your ChexSystems report once every 12 months or if you've been turned down when you applied to open a new bank account within the last 60 days.
You can request your report via phone, fax, or mail, but the easiest method is just to fill out the online form on ChexSystems' website. After answering some identity verification questions, you'll be able to view your report immediately and save it if you'd like to refer back to it later.
You can request your QualiFile Score from ChexSystems for free as well, but you must fill out a paper form and fax or mail it to ChexSystems, which will then mail you your score within 15 business days of receiving your request.
Does my ChexSystems report affect my credit score?
Credit reports and ChexSystems reports focus on different things, but there are a few occasions in which there could be some crossover. For example, if you rack up a bunch of overdraft fees and don't pay your bank, your bank may report you to a collections agency as well as to ChexSystems. In that case, your overdraft fees could lead to a negative mark on your credit report.
As long as you stay on top of your payments, you shouldn't have to worry about your ChexSystems report affecting your credit report, but you should aim to keep both in good standing if you don't want any trouble with your bank.
What do I do if I've been denied a checking or savings account?
If you’ve been turned down for a checking account or a savings account, it may be due to negative items on your ChexSystems report. In this case, you have a few options.
Open an account with a bank that doesn't use ChexSystems
The majority of banks and credit unions consult ChexSystems, but there are some that don't use it. You can try opening an account with one of these banks instead if there's one that offers an appealing account with reasonable fees. You can inquire at the bank if it pulls your ChexSystems report before approving your application.
Look for a second-chance bank account
Some banks may not allow you to open a regular bank account if you have a negative ChexSystems report, but they may give you the option to open a second-chance bank account. These are accounts aimed at high-risk individuals. They may come with higher monthly fees, but if you prove you can manage your account responsibly, your bank may let you move up to a regular bank account after a year or so.
Try to improve your ChexSystems record
There's no way to remove negative marks from your ChexSystems report if they're legitimate, but you can resolve to turn over a new leaf and stop doing the things that led to the blemishes on your report in the first place. Here are a few tips:
- Set up overdraft protection: If you're worried about overdrawing your account, see if your bank enables you to set up overdraft protection so it'll automatically transfer money from your linked savings account to a checking account or provide you with a line of credit to prevent you from incurring an overdraft fee.
- Keep an eye on your account balance: Check your account balance regularly if you know it's low to avoid reaching a negative balance. If you know your account charges monthly fees, find out at which point in the statement cycle those fees come out of your account so you can be prepared.
- Stay connected to your old bank after account closure: You might close a bank account and forget that you have a few bills that are automatically paid out of that now-defunct account. This could result in a negative balance you're not even aware of. Make sure you provide your old bank with updated contact information when you close your account so it can get in touch with you to resolve matters like this.
Making real changes to your ChexSystems report will take time, but following these tips will get you started on the right path.
If you pay off your debts with your existing or closed bank accounts, get some sort of receipt from the bank. Banks may be willing to work with you if you can prove you've paid off your old debts.
What if there's an error in my ChexSystems report?
Disputing errors in your ChexSystems report is similar to disputing errors in one of your credit reports. If you notice anything inaccurate, you should reach out to ChexSystems and the bank or credit union that contributed the faulty item to notify them of the error. If you have any documentation proving your claim, such as proof that you paid off a balance that's still showing as negative, submit this as well.
Once ChexSystems has received your written request, it can take up to 30 days to investigate the matter. If it determines the information in your report is accurate, the item will remain, but if ChexSystems determines that it's inaccurate and potentially harming your ability to secure a new bank account, it will remove the mark. However, because this process takes time, you may have to delay your plans to open a new bank account until it's done.
You may never need to worry about your ChexSystems score if you keep your bank accounts in good standing and avoid committing fraudulent activity. That said, it doesn't hurt to check your report once per year to make sure everything there is accurate, especially if you plan to open a new bank account in the near future.