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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