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More Than a Cereal: What You Should Know About ChexSystems

If you’re concerned with your credit score and general financial healthy, you’ve probably heard of Experian, Equifax, and TransUnion. They collect information about how much available credit you have and how you use it. What you may not be aware of is that there’s a similar group who monitors how you bank.

ChexSystems is a consumer reporting agency which compiles a report of everything that your banks have reported in your last 5 years of banking. But unlike credit reports, Chex reports only contain negative information.

When you’re joining a new bank, you may be denied an account if your Chex report includes enough negative items (even 1 may do it). It’s the bank’s way of protecting themselves (and their other customers). Unfortunately, if you have a good history overall, a few mistakes may make banks consider you too much of a risk.

What’s In a Chex Report?

A number of things may go into a Chex report. If you frequently overdraw your account (bouncing checks) or if you deposit a lot of bad checks, that may show up on your Chex report. If your bank thinks that you’re trying to defraud them or defraud others through your account (using it to run a 419 scam would be a random example), they may report it to your Chex report.

One thing that’ll definitely be on your Chex report: unpaid balances with the bank itself! Overdraft charges, fees, unpaid lines of credit, if you owe them and don’t pay, it’ll end up on your Chex report.

The good news is that ChexSystems doesn’t automatically see your account activity, your bank has to choose to report it. So if you bounce a few checks but clear everything up right away, your bank may not report it at all. Often banks have guidelines about what does and doesn’t get reported. But if you let your account remain delinquent for 3 months or if you commit fraud, it’ll probably end up in your report.

Can I See My Chex Report?

Because Chex is under the same rules as the three credit bureaus, you can order your Chex report once a year and if you’ve been denied a bank account because of it in the last 60 days. (You can get free copies of your credit report from each bureau, once a year at annualcreditreport.com.)

And you can place an alert with Chex if your ID has been stolen, just as you do with the credit reporting agencies.

How Can I Improve My Chex Report?

First, the Chex report only contains information from the last 5 years. Anything before then doesn’t count. So start by getting your financial life in order going forward. If nothing else, time will take care of it. Also, some banks will still let you open accounts as long as you don’t have any issues from the last year and have paid everything, so a problem in a Chex report may not keep you from getting a bank account.

In getting your finances straight, talk to a bank representative about how you can fix the problems they’ve reported. Work with them to figure out you can pay and what the bank will accept. If you’re somehow in too deep, the bank may be willing to settle for less than the amount owed. So don’t give up if it seems too big, remember that the bank would rather have some money than nothing.

Once you’ve paid your bank, you can request that they ask Chex to remove the incident entirely. The bank is required to update the information by adding that you’ve paid or settled the account, but they’re not required to ask that it be removed. Remember this when you’re working with the bank representative. Politeness can pay off big.

If your Chex report includes errors, you may file a dispute just as you can with credit reports.

Can I Get a Bank Account Despite a Bad Chex Report?

Maybe. A lot of it depends on what’s in your report and which banks you try. A good place to begin is getting your annual free copy. Of course, if you’ve just been denied because of ChexSystems you’re also entitled to a free copy.

Talk to all the banks and credit unions in your area, different ones have different approaches and some don’t even check with ChexSystems. If they’ve denied you, ask to meet with someone from the institution and find out if they offer you any other options or if they know of reputable banks which will offer you second chance bank accounts. For example, Wells Fargo has what they call “opportunity accounts” for people with poor banking or credit history.

If you have any bank accounts open, don’t close them unless there’s something very wrong with the bank. By “wrong” I mean that the bank is mishandling your payments, losing your money, or something dramatic. If you’re having trouble opening a new bank account, then you may have to put up with monthly fees, low interest, etc for now. You can try opening other accounts, but don’t close the old one until you have a new account established.


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{ 12 comments… read them below or add one }

Kacie October 29, 2008 at 3:18 pm

Never heard of Chex reports…I’ll have to check that out!

Oh, and your post didn’t show up in my reader until a few minutes ago. Probably just Google reader acting wonky.

Aya @ Thrive October 29, 2008 at 4:42 pm

Good thing to know! Just another reason to stay on top of your finances, real consequences…!

Zhu October 29, 2008 at 10:44 pm

So many things I don’t know about finances… it’s scary, really.

I first heard of credit report this year, thanks to you, and I ordered mine for free by mail from Equifax. So far so good.

Thanks helping us becoming money-savy! It’s not that easy when you move to a different country that has a different system…

mrsmicah October 29, 2008 at 10:48 pm

@Zhu, glad to help!

Because I live in a lower-income area, I often see advertisements for payday loans, bad credit stuff, etc. I recently saw something about ChexSystems and decided to look into it. But most people don’t even hear about it until they’ve already been denied.

Student Scrooge October 30, 2008 at 7:39 pm

ChexSystems is pretty scary — very few people know of it, and it is easy to even inadvertently end up on the the ChexSystems bad list. For people who like to “game” bank sign-up bonuses, it is important to be aware that opening too many accounts in a short period will trigger a ChexSystems rejection, which is bad, as it will be pretty hard to open a normal bank account with any national bank with a ChexSystems flag.

On the bright side, my understanding is that really the only things that can hurt you on ChexSystems are (a) breaking the bank’s rules (bouncing checks, failing to pay, fees, etc.) and (b) opening too many accounts in a short period of time. At least you don’t have to worry about something like a FICO score for checking accounts.

Amber C October 31, 2008 at 9:29 am

Wow, I had never heard of this either. Good to know.

Donna November 1, 2008 at 2:48 pm

I did some research into this for a friend who had an account go up in flames when she had a bout of serious mental illness a couple of years back. In her case, there is nothing she can do but wait for these things to drop off her Chexsystems report, but there are ways to get an account if you are in the same situation as my friend.

This woman maintains an up-to-date list of banks and credit unions who will work with you if you have something on your Chexsystems report. (All data on a Chexsystems report is negative – this isn’t like a credit report.)

http://www.chexsystemsvictims.com/AboutmyList.html

In my friend’s case, she was able to get an online checking account with Bank of America. If you apply at a branch, they will reject you. For some reason, they’re not running Chexsystems reports for online banking.

Melissa November 2, 2008 at 9:20 pm

I work at a bank, and you’re right, we do check everyone against Chexsystems. (We also check everyone against OFAC too) I’m not sure what how strict our rules are though since I don’t open accounts yet. I have seen people get turned down though so they are probably pretty strict.
Anyway I most know about Chexsystems from working at the mall; every time someone wrote a check to pay for something, we had to run their check and their driver’s license through our Chexsystems machine. If it came up bad, we had to reject the check and ask them to pay another way. We had little cards with 1-800 numbers to give to the customer, so the customer could call and figure out what was up. At my first job, our boss used to tell people that sometimes, Chexsystems would reject their check if they didn’t have enough information in their records about the person, like if it was a new account or something. I don’t know if that’s true or not but I always told people that when I had to turn them down because I felt bad. 🙁

Dani October 9, 2009 at 3:39 pm

I was turned down twice by the same bank and two years apart. There should be nothing to report. I’ve worked in banking for decades and maintained my DDA accounts in an exemplary manner. Before Chexsystems would tell me what they were reporting, I would have to provide a huge amount of personal information. I wouldn’t give them the information so I never find out. Also Chexsystems is regional and if you move to another state they may not have your information and you can be turned down for lack information as well as negative information. It’s possible we were turned down because our drivers licenses didn’t match our state.

Mio Vukomanovic April 14, 2010 at 5:16 am

In the summer of ’09 I opened up a checking account at my local bank. It was my first bank account and I did not look after my finances well. I went over on it, $862 (including fees) in October. The bank gave me a couple months to pay off the bill, but I didn’t have the money. They closed down my account in December and said they would report me to CHEXSYSTEMS. A couple weeks ago I decided to open a online checking account with Bank of America. I was surprised when they approved me. I thought that they made an error and would find me on CHEXSYSTEMS a week or so later. Well, two weeks later and they still haven’t closed the account. Soooo, I decided to go on the CHEXSYSTEMS webiste and order the free report to see what they have listed about me. I get the report four days later and every field that is suppose to list infractions just shows “NO ITEMS FOUND”. EVERY SINGLE INQUIRY!!…I was shocked. The report does show my social security number…so I knew it wasn’t an error in indentification. Am I just extremely lucky the bank didn’t report me after what…150 days?!?

Marie June 24, 2012 at 3:15 pm

Unfortunately, consumers do not have similar protection against corrupt banks…JP Morgan Chase, for example, can gamble and lose 3 billion of its depositors savings and count on reimbursement from FDIC, i.e., our tax dollars.

Virgie Hudgins October 7, 2015 at 10:34 pm

Hey piece ! I was fascinated by the facts – Does anyone know if my company can acquire a blank passportmax Japan VISA App Form form to type on ?

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