Many people are aware that their credit report is tracked by consumer reporting agencies (CRAs) such as Equifax, Experian and TransUnion. There’s also a similar system that tracks your banking history, a CRA named ChexSystems. If you’ve ever opened a checking or savings account, you may have a ChexSystems report, also called a consumer disclosure.
Banks and credit unions report information on closed checking and savings accounts to ChexSystems, which puts the data in a report that can be used by financial institutions to deny your application for opening an account. As a result, it’s important to be aware of what it holds and what to do if it causes you problems in the future.
What is ChexSystems?
ChexSystems is a consumer reporting agency (CRA) that monitors your checking and savings account activity over the course of your financial life. Much like other CRAs, ChexSystems collects data and compiles it into reports that financial institutions and merchants can review to help them make decisions about approving you for financial products you’ve applied for. CRAs are also allowed to include your name on lists creditors and insurers use to make prescreened product offers, though you may opt out of these lists.
If you’ve ever opened a bank account in the United States, you’ve probably been screened by ChexSystems. However, unlike the information sent to CRAs that track your entire credit history, ChexSystems mainly includes reports of accounts with “bad” banking activity, like bounced checks, unpaid overdraft fees, outstanding debt, an account closure due to insufficient funds, among other things.
ChexSystems reports may also include records of check-cashing inquiries you have initiated, check orders you have placed and report inquiries (this shows how often you’re applying for accounts). You may also find personal information (like your name and past addresses), records of past identity theft alerts or credit freezes, information about your Social Security number and public records on your report.
Do credit unions use ChexSystems?
The Fair Credit Reporting Act (FCRA) and the Federal Trade Commission (FTC) regulate ChexSystems, like they do other credit reporting companies. This means that a range of financial institutions and organizations can request your ChexSystems report, including:
- National banks and federal branches of foreign banks
- Federal Reserve System member banks
- Savings associations or federally chartered savings banks
- Federally-insured credit unions
- State-chartered banks
- Air, surface or rail common carriers regulated by former Civil Aeronautics Board or Interstate Commerce Commission
- Activities subject to the Packers and Stockyards Act, 1921
Additionally, ChexSystems runs your report upon your request. Cases where you might initiate a ChexSystems report to be opened would include a written instruction or a business transaction (all transactions must be initiated by you), if you’re filing for child support or if it is subpoenaed by a court order or federal grand jury. You’re also entitled to a free annual credit report from nationwide CRAs, including ChexSystems (more details on that later).
However, keep in mind that if your employer or other (nonfinancial) organizations want access to your ChexSystems report, you have the right to give your consent or decline under the FCRA.
How to avoid having a record with ChexSystems
There are several types of banking activity that could cause your ChexSystems report to have negative records. They are:
- Having several overdrafts reported in a short period of time
- Falsifying information on your bank account
- Nonpayment of insufficient funds or overdraft fees
- Fraudulent activity
- Violation of banking rules and regulations
- Account closures due to insufficient funds or failure to pay fees
- Bounced checks
How to get a free ChexSystems report
If you may have had one or more of these negative banking events take place, it’s a good idea to check your ChexSystems report. The good news is that you have the right to request your free report once every 12 months to see exactly which banking activity may be working against you. You can also request your ChexSystems Consumer Score — a score that ranges from 100 to 899 and serves as a numerical snapshot of your report — but you may have to pay for it. Banks and credit unions see consumers with higher scores as lower-risk customers.
Even if you don’t think you have a ChexSystems record, it’s a good idea to request your free report. The report will show any negative banking activity that flags your name in their system, which could be signs of identity theft. If you want to see what a sample ChexSystems report looks like, a sample report is available on their website.
You can request your free ChexSystems report online, or by phone, mail or fax. ChexSystems will send you your report via USPS within 15 business days.ChexSystems phone number
Call 800-428-9623 to go through an automated system to request the report.ChexSystems mailing address
Print and fill out the request form and send it to:
Chex Systems, Inc.
Attn: Consumer Relations
7805 Hudson Road, Suite 100
Woodbury, MN 55125ChexSystems fax
Print and fill out the request form, and fax it to 602-659-2197.
How long do you stay in ChexSystems?
According to the FCRA, a consumer reporting agency (including ChexSystems) report can’t contain negative information that’s more than seven years old, or any bankruptcies that are more than 10 years old. However, ChexSystems removes any negative banking information (apart from bankruptcy) on your consumer report after five years. Inquiries that result from consumer action (like applying for a checking account) remain on reports for two years.
Is getting a checking account while on ChexSystems impossible?
Getting a checking account while you have a ChexSystems report showing negative banking history may be more time-consuming than if you didn’t have a record, but it is possible. Many banks and credit unions offer checking accounts to people with a negative banking history — but they may come with additional fees or stipulations.
How to get out of ChexSystems
If you’re struggling to open a necessary account due to a negative ChexSystems record, or you want to be proactive in clearing your report, there are a few actions you can take to recover your good standing with ChexSystems.
Your first step will be to request your report from ChexSystems (instructions above).
After you receive your report, review it for any false or outdated information. If you see any errors, you need to dispute them as soon as possible. You can submit your dispute claim to ChexSystems online, or by mail or fax. You’ll need to print and fill out a request for investigation if disputing by mail or fax, and you can find more information about submitting a dispute on the website.
Once you submit a dispute, ChexSystems opens an investigation. You can also request that ChexSystems contact the source of negative banking information (i.e. the credit union or bank who noted the negative banking history) directly to clear things up. The investigations are typically completed within 30 days — but might be extended if ChexSystems needs more information.
While you can get inaccurate information removed by disputing it, credit reporting agencies may continue to report negative information if it is accurate, per the Fair Credit Reporting Act. The negative records will eventually age off the report, as explained above.
What you need to know prior to opening a new bank account if you have a ChexSystems record
If you have a record with ChexSystems and are planning to open a bank account soon, there are a few things to keep in mind. You won’t necessarily be denied a bank account with a financial institution – even if you have a record. If you only have one or two transgressions on your report, it’s possible that you won’t have any problems when applying for a new checking or savings account. However, if you do have negative items on your report, opening a new account won’t guarantee that your prior history will improve or be repaired.
Alternative checking account options to consider
If you’ve already applied for an account and have been denied, don’t worry. You have other options for managing your money.
- A second chance bank account. Opening a second chance bank account may come with stipulations such as monthly fees or a minimum balance requirement, but it’s often a best-case scenario for those who are barred from traditional checking and savings accounts due to their poor banking history.
- Prepaid cards. If you are receiving a regular paycheck and need a way to hold your money conveniently, prepaid cards may be the answer you’re looking for. They’re convenient to use, as they act like a debit card by holding your money in a prepaid account. They can be used at major retailers in place of a debit card, as well. However, they may have multiple fees. For example, setting up the card may charge a fee and loading the card with money may involve another fee.
- Money orders. A money order is like a prepaid check from your bank — you have to have the money available in your account to purchase the money order in the amount you desire. Although money orders may have fees associated with them, they can be a method of paying bills if you don’t have a checking account available to you. In that case, you buy the money order with cash. It can be helpful to know fees ahead of time when going this route. For example, obtaining a money order from Walmart costs approximately 70 cents for any amount under $1,000, while the U.S. Postal Service charges $1.20-$1.65 based on the amount.
- Cash. Finally, you can always use cash to make payments for day-to-day expenses. This lifestyle can be useful if you’re unable to open a checking or savings account, and if you’re looking to enforce better budgeting habits with a cash-only system. However, using cash can be uncomfortable if you’re making a large purchase and don’t want to carry large amounts of cash around with you. You lose flexibility if you unexpectedly need more than the cash you currently have on your person.