ChexSystems is a reporting agency that collects information about bank accounts in your name. When you apply for a new account, your bank or credit union may consider your ChexSystems report when deciding whether to approve you.
It serves the same function as a credit report does when you apply for a loan or credit card, but your ChexSystem report looks at different things. You want to keep yours in good standing or you may have difficulty opening new bank accounts. Here's what you need to know about ChexSystems and how it can affect you.
Your ChexSystems report primarily focuses on negative marks associated with your current or past bank accounts, but there's other information as well. It contains:
The average person shouldn't have too much to fear from their ChexSystems report, but if you are trying to scam people or you frequently overdraw your account, you're probably going to run into trouble the next time you try to open a bank account.
Your QualiFile score is based on your ChexSystems report. This three-digit number ranges from 100 to 899 with a higher number being better. A low score suggests that you're more likely to commit fraud or to overdraw your account.
Every bank sets its own rules about what constitutes an acceptable score. If you fall below your bank's minimum acceptable score, you may not be able to open a bank account there.
It's possible to raise your QualiFile score, though this may not happen quickly. Most of the information in your ChexSystems report stays there for five years. Unless you can prove the negative marks in your report are inaccurate, you just have to wait for them to drop off.
ChexSystems is legally required to give you a free report every 12 months and whenever you've been turned down for a bank account within the last 60 days.
You can request your ChexSystems report via phone, fax, or mail, but the easiest method is filling out the online form on the ChexSystems website. Once you answer some identity verification questions, you'll be able to view your report immediately and save it if you'd like to come back to it later.
You can request your QualiFile score for free as well, but you can't get this online. 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.
Credit reports tend to focus on loan and credit accounts while ChexSystems reports focus on deposit accounts. But there are a few occasions where you may see some overlap between the two.
For example, if your bank sends you to collections because you haven't paid your outstanding bank fees, the collections account will show up on your credit report and your bank will likely report you to ChexSystems as well.
If you've been turned down for a deposit account, it may be because of a bad ChexSystems report. Pull yours and then decide on your next steps. You have the following options.
Most banks and credit unions consult ChexSystems before approving new accounts, but not all of them do. Consider working with a bank that doesn't use ChexSystems if you can find one that offers an appealing account and has reasonable fees. Inquire if the bank checks your ChexSystems report before filling out an application if you're not sure.
A second-chance checking account is a special kind of checking account designed for high-risk clients. These accounts may have higher fees, but if you show that you can handle your money responsibly, your bank may upgrade you to a regular checking account in time.
You cannot get rid of legitimate negative information on your ChexSystems report, but you can stop doing the things that put those negative marks there in the first place. Here are a few tips:
None of these things will improve your ChexSystems report overnight, but they can make a difference in time.
If you do pay off old debts, get a receipt from your old bank showing that you've done so. Some banks may be willing to work with you even if your ChexSystems report is bad if you can prove you've settled your debts.
Disputing an error in your ChexSystems report is similar to disputing an error in your credit report. Reach out to ChexSystems and the bank or credit union associated with the incorrect information and request that they correct the error. If you have proof that the information is wrong, like a copy of a receipt showing you've paid a debt that's still reported as outstanding, send a copy of this as well.
ChexSystems has up to 30 days to investigate the matter from when it receives your request. If it determines the information listed in your report is accurate, it will stay as is. But if it determines that the information is wrong and could prohibit you from opening up a new bank account, it must correct the issue. This can take a little time, so you may have to wait a while before you can open your new bank account.
Most people won't ever have to worry about a bad ChexSystems report, but it never hurts to double check yours, especially if you plan to apply for a new bank account in the near future. Doing so only takes a few minutes and it can save you a ton of hassle.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.