ChexSystems: What you need to know

The reasons someone might want or need a checking account are clear: They make it easier to access money, make deposits and—along with credit cards—make purchases. What might be less clear is how checking account applications are judged. When it comes to opening a new checking account, one thing that’s worth knowing about is ChexSystems. 

So what can you do if you apply for a new checking account and get denied? You may be able to find out why you’re denied in your ChexSystems report. Learn more about what ChexSystems is and what information your report contains.

Key takeaways

• ChexSystems is a consumer reporting agency.
• It’s similar to credit bureaus, but its focus is on checking and savings accounts.
• It reports on bank account data, including applications, openings and closures.
• Negative items in your ChexSystems report can limit your ability to open a checking account.

ChexSystems Inc. is a consumer reporting agency that collects and reports information on checking account applications, openings and closures—and the reason for closures. 

It’s similar to a credit bureau, but it’s focused on deposit accounts. ChexSystems evaluates how you use your own money rather than money loaned to you. So its reports aren’t related to your credit history. 

If you’ve had overdrafts and unpaid fees, they may be included in your ChexSystems report.

While your ChexSystems report likely won’t affect your credit scores, it may impact whether a bank or credit union will approve your application to open a new account.

When a consumer applies for a checking account, financial institutions want to know their banking history to understand what sort of financial risks they might present. ChexSystems, which operates under the federal Fair Credit Reporting Act, uses its information to create a risk score. And banks and credit unions may use that score to evaluate the applicant’s account activities.

A ChexSystems score ranges from 100 to 899. The higher the score, the lower the perceived risk. 

Some of the negative information that may be included in a ChexSystems report includes suspected fraudulent activity, involuntary account closures and unpaid negative balances. Reports can include information on personal and joint accounts.

If you’ve been a victim of bank fraud, check-writing fraud or identity theft, you might want to obtain and review your ChexSystems report. Those who have difficulties opening or closing a bank account should also consider requesting their report. 

Getting a copy of your report is a straightforward process. And requesting a copy won’t affect your credit scores. 

You can visit ChexSystems online to request a copy of your report and score.

Many major banks use reports like the ones ChexSystems provides to evaluate applications for accounts. Some may still offer accounts for those with some negative items in their reports. It might help to check what the banks’ and credit unions’ policies are.

If you review your ChexSystems report and notice any inaccurate information, you have the right to dispute it. You can start the process on the ChexSystems website. 

It can be helpful to collect any information relevant to the disputed information. A ChexSystems investigation may take up to 30 days.

If the information in your report turns out to be accurate, you may owe money to your bank or a collection agency. You might be able to work with the bank or collection agency to arrange a payment plan if you can’t pay the entire amount at once.

If the negative bank account activity in your ChexSystems report is accurate, it will stay in your report for five years from the time it was first reported.

If you’re denied a checking account, there are alternatives.

Second-chance checking accounts offer an opportunity for those who may have been denied an account. But second-chance accounts might not offer the same services as typical accounts, and they may have fees. With responsible use, though, it may be possible to upgrade.

A checking account can make your money easily accessible. And you typically have access to benefits like ATM banking and direct deposit, which can make personal finance tasks easier. But if you’re unable to open a regular checking account due to negative items in your ChexSystems report, you still may be able to get some of these benefits with a second-chance checking account.