What Is ChexSystems and How Does It Affect You?

If you’ve been denied a banking account, chances are you have come across ChexSystems.

This consumer reporting agency is a tool that many banks and credit unions alike use to determine whether a customer should get an account or not.

In this article, we will be taking a closer look at how ChexSystems works, including what you can do about a negative report and how you can avoid ending up on the wrong side of it in the future.

In This Article

What is ChexSystems?

ChexSystems, Inc. is a credit reporting agency that maintains data on bank and credit union clients.

The information is submitted by the banks and credit unions themselves and includes a variety of irregularities that customers commit.

Items Shown on a ChexSystems Report:

  • Overdrafts
  • Bounced checks
  • Negative balances
  • Fraudulent activity
  • Identity theft
  • Account abuse
  • Involuntary closure of accounts
  • Bank account applications

A ChexSystems report will include banking history on checking accounts and savings accounts for the past five years.

Based on these irregularities, consumers are given a score that ranges from 100 to a maximum of 899. The higher the ChexSystems consumer score, the safer the consumer is considered, while lower scores are generally associated with higher risk.

The report generated is referred to as the Consumer Disclosure, and aside from your score will have your name, SSN (Social Security Number), and address. Past addresses are also included in the report.

Unlike credit bureaus, ChexSystems reports only contain negative information.

It’s important to note that a ChexSystems report is very different than your credit score report. Credit scores are maintained by credit bureaus, including Experian, TransUnion, and Equifax.

Most lenders and banks generally use these reports, but not all of them.

Who owns ChexSystems?

ChexSystems is owned and run by Fidelity National Information Services – a Fortune 500 company based in Jacksonville, Florida. The company is also known as FIS for short.

FIS acquired ChexSystems from another company called eFunds, which FIS acquired back in 2007 for $1.8 billion.

FIS was founded in 1968, and in 2020 generated a revenue of some $12.5 billion. It is a publicly listed company and is listed on the New York Stock Exchange(NYSE) under the FIS ticker.

Who uses ChexSystems?

Around 80% of all banks and credit unions in the US use ChexSystems to screen account applicants looking to open a new account.

When you apply to open a new bank account online or in-person, such as a new checking account, it will run a report on you if the bank uses ChexSystems.

Banks do this to determine your risk level, that is to say, how likely you are to default on any payments due. If your ChexSystems record shows a low score, the bank might determine that you’re too risky and deny you the new bank account.

Some banks are also known to run ChexSystems reports on existing customers, so having opened an account does not clear you from having a negative report impact your personal finance.

What is a Security Freeze with ChexSystems?

As a consumer, you have the right to place a security freeze with ChexSystems on your report.

Through this freeze, ChexSystems will not release any information about you without your explicit consent. The freeze is something you’d mainly use to prevent fraud.

Once you put a freeze, anyone who requests your information will receive a message indicating that you are blocking the data from being released.

Keep in mind that this is not a blanket block, and in some cases, ChexSystems may still release your information.

How To Obtain a ChexSystems Report

If you want a copy of your ChexSystems report, there are a couple of different ways to go about it.

FACTA

If you have not been denied an account but still want to see what information your report includes and doesn’t include, you can request one for free.

You can request a free copy of your report every 12 months, thanks to FACTA.

FACTA, which stands for Fair and Accurate Credit Transaction Act, is an amendment to the FCRA, which stands for Fair Credit Reporting Act.

It was passed into law back in 2003 and had a provision that allows consumers to request one free ChexSytstem report a year (as well as reports from the three main credit bureaus).

There are four different ways you can ask for a report, including:

The Bank that Denied You An Account

If a bank has denied you an account due to a ChexSystem report, you can also request a copy of the report, free of charge, so that you can understand the reasons behind their decision.

Once you have obtained a copy of the report, it is crucial to review all of the information contained therein and make sure that it is 100% accurate. It’s best, to be honest here, and if you have made some mistakes in the past, own up to them.

If this is you, know that you can still get a bank account. The important thing is to own your mistakes, as this is the first step to learning from them and start to move forward towards a brighter future.

How To Open a Dispute

If you believe that the information is inaccurate or incomplete, or you’re the victim of identity theft, you have a right to dispute the information contained in the report.

There are two ways to go about this, depending on your preference:

  1. Through the source: You can dispute the information directly with the source (the bank or credit union that reported the information).
  2. Through ChexSystems: You can also dispute the information directly through ChexSystem Dispute.

First, you need to identify the negative items that you want to dispute and then make sure you can provide solid information about the nature of the dispute.

You will need to provide this information when submitting the dispute so try to be as clear and concise. Doing this will help you make sure that your dispute is resolved in the shortest time possible.

If you are opening your dispute directly with ChexSystems, there are a couple of different ways to go about it. You can either use the online form or by mail or fax.

The advantage of the online form, which is available through the ChexSystems website, is that it is quicker and more secure, so you’ll be able to get to the bottom of things quicker.

If you’re mailing in your dispute, you’ll need to send it to:

Attn: Customer Relations
7805 Hudson Road, Suite 100, Woodbury, MN 55125

You will also need to provide some personal information, so make sure you have this handy when it comes to submitting the report, including:

  • First name and last name
  • Address
  • Date of Birth
  • SSN

If you prefer to open your dispute directly with the source (the bank or credit union that filed the reported item), you’ll need to follow their procedure instead.

As this can vary widely from one financial institution to another, it might be best to give their customer support a call and inquire about how you can go about it.

The bank will probably request the same information needed to file the dispute with ChexSystems, so ensure you have this handy when calling them to avoid delays.

ChexSystems takes about 30 days to complete its investigations unless you’re a Maine resident, in which case you can expect a speedier completion in 21 days.

What To Do If Your Bank Account Application Was Declined

If you have been denied an account, there are several different avenues that you can take.

Bank Override

The first thing you need to understand is that some banks use overrides, which allow consumers who have been otherwise denied an account to open one anyway – even if their ChexSystems report score is below the permitted threshold.

Here, you might want to ask your bank if there is anything you can do to have the decision reversed.

Second Chance Checking Account

If the decision is final, you might want to look into getting a second-chance checking account. These checking accounts are for people who have been denied an account due to bad credit.

In most cases, you’ll get the same perks and features as a standard account, except overdrafts, overdraft protection, and checks.

Banks do this to limit the amount of credit you can take out and, as such, minimize their risk. These accounts also tend to come with monthly fees and no balance requirements.

In turn, several second-chance checking accounts include tools and features that can help you rebuild your credit. These can consist of reporting payments to credit bureaus, free reports, and tools to help you budget and manage your cash flow.

Some accounts will also include a prepaid debit card and free ATM withdrawals.

Several banks also offer upgrades to standard accounts after six months to 1 year. Of course, your account needs to be in good shape so make sure that all your payments go out on time and keep the account balance positive.

How To Avoid Bad ChexSystems Reports

While we cannot cry over spilled milk, it is important to turn negative outcomes into positive ones by learning from them and making the necessary adjustments to avoid repeating the same mistakes.

Make sure you pay all payments on time, including any fees and interest on overdrafts. The same goes for credit card payments and checks.

If you’re running low on funds, consider making a direct deposit from your savings account as soon as possible.

FAQs

How long are you in ChexSystems?

ChexSystems reports retain account history data for the past five years.

Does ChexSystems affect my credit score?

Your ChexSystems report in no way affects your credit score.

How can I find out if I am on ChexSystems?

You can find out if you’re on ChexSystems by requesting a report. Under FACTA, you are entitled to one free report every 12 months.

Make sure you use this free pass wisely to avoid having to pay for it. If you have just been denied an account (because of a ChexSystems report), you can request a copy of that.

How do I clear my ChexSystems?

If the report contains inaccurate information, contact ChexSystems and open a dispute on the negative items in your report.

If you’re not quite sure how to open a dispute, refer to the ‘How to open a dispute’ section of the article. On the other hand, if the information is accurate, you will need to wait five years before the information is cleared from your account.

Can you check ChexSystems online?

Yes, you can request consumer reports online through ChexSystems. Under FACTA, you are entitled to one free report a month.

Requesting a report will not affect or alter your score and might be a good idea to make sure you don’t hit any snags when opening a new bank account.

Is Your ChexSystems Report Up to Par?

While being denied a new account or forcing account closures is not a positive experience, taking something from it can help you make sure that you can learn something from experience and improve your financial situation.

Consumer credit reports can make it difficult to access certain financial products and should be taken seriously.

Advice such as pay your overdraft fees as soon as possible is excellent – but like a lot of things, it’s easier said than done.

The important thing here is to dispute incorrect information and include as much information as possible right from the start. Adding more details later can increase the process by as much as 15 business days.

Remember that with sound financial understanding, you can still rebuild your credit. Take it one step at a time, and remember that financial planning is crucial.

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