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A complete guide to ChexSystems®

Have you ever tried to open a new checking or savings account only to be given a big fat no? Or maybe you hit a rough patch with your finances a few years back, and you’re haunted by memories of fighting your way back to a positive balance after multiple overdrafts.

Do banks talk? Did your old bank spread the word about your mistakes? Or are you being rejected for some other nebulous reason?

It can be a major downer finding out that big-name banks don’t want to do business with you. It’s equally scary to wonder why that’s happening or to know it’s because you had a hard time before, and your previous errors are lingering over you. That’s why it’s so important to learn about ChexSystems reports and what they mean for your financial future.

Dig into this guide to learn what ChexSystems is used for, how you can find your report, and what you can do to restore your reputation.

What is ChexSystems?

ChexSystems is a consumer reporting agency that collects info about your banking history to create a “big picture” assessment of past banking activity. These reports cover assets like checking accounts and savings accounts, looking at whether you’ve had any “oops” moments like bouncing a check or closing an account with a negative balance.

In many ways, ChexSystems is similar to a credit bureau, except they’re tracking banking health instead of credit use. Banks use ChexSystems reports to gauge what decisions you might make as a customer. When you’re applying for a new account with a bank, the institution will generally run a ChexSystems report first.

That, combined with other details gleaned from your application, will help the bank make a decision as to whether or not you can open an account with them.

Are ChexSystems reports and credit scores the same thing?

Nope! ChexSystems reports look at banking history, seeking out risk factors like bounced checks, suspicious account closures, and potential fraud. Credit scores reflect someone’s credit history, including how much they’ve borrowed, how much credit they’ve used, and whether they’ve made payments on time.

Banks rarely look at credit scores when evaluating an account application, and credit card companies and lenders rarely look at ChexSystems reports for their evaluation purposes.

Pulling your ChexSystems reports won’t affect your credit score, either. But, negative items that appear on your ChexSystems report could potentially affect your credit as well. For example, a negative bank account balance that’s sent to collections would appear on your ChexSystems report and cause your credit score to sink.

What is ChexSystems used for?

Most people don’t know ChexSystems even exists until they run into the consequences of a negative report. Banks typically only run a ChexSystems report as part of an account application.

The info from those reports is used to vet potential customers. It highlights those that seem to come with the most risk attached, so banks can decide whether they want to take on that kind of liability.

ChexSystems reports are not used as an indication of creditworthiness. You won’t see them attached to a car loan or mortgage.

How does ChexSystems work?

The ChexSystems process involves a deep dive into your past banking activity. This includes looking for red flags, such as:

  • Bounced checks

  • Overdrafts

  • Involuntary account closures

  • Too many recent account applications

  • Negative balances still unpaid

  • Account abuse

  • Abuse of ATMs/debit cards

  • Identity theft

  • Fraud

All these factors go into creating the ChexSystems risk score, which ranges from 100 to 899. The lower the score, the higher the risk (at least in ChexSystems’ eyes).

The thing to remember about ChexSystems reports is that it’s just a report, not a decision. Banks are left to interpret the information on their own, and what results in a nay from one institution could be a pass from another.

Some banks are more willing to take a risk. Others may decide even a few suspect transactions are grounds for rejection.

What’s on a ChexSystems report?

First, it’s crucial to know that ChexSystems only collects negative information, and that information is only taken from closed bank accounts. The agency doesn’t analyze open/active bank accounts, credit accounts, or loans.

So, if you do access your own report (instructions on how to do that appear below), don’t freak out if it’s pretty barren other than a few lines detailing your greatest mistakes. It may feel unfair that your best moments go unnoticed here, but that’s the way the cookie crumbles.

How to get your ChexSystems report

If you’ve never had an issue opening or closing a bank account, chances are your ChexSystems report is clean as a whistle. But if you’ve had an account application that was rejected, or if you’re just curious about what your report looks like, you may want to request a copy.

Thanks to the Fair Credit Reporting Act (FCRA), you’re entitled to a free copy of your report under either of the following circumstances:

  • Once every 12 months

  • Any time you’ve been rejected by a bank after applying for a checking or savings account (in this case, you have 60 days to request your free copy)

There are multiple ways to request your report:

  • Call ChexSystems directly at (800) 428-9623

  • Submit a request online via the

    ChexSystems website

  • Fax a ChexSystems request form to (602) 659-2197

  • Mail a request form to: ChexSystems Inc. Attn: Consumer Relations 7805 Hudson Road, Suite 100 Woodbury, MN 55125

It can take as long as 5 business days to receive a response to your request (always sent via snail mail).

You’re also entitled to know the reason your application has been rejected. While it seems like you’d know if you’ve left a trail of overdrafts and bounced checks in your wake, it’s also possible to receive a bad report for other reasons. If you’ve been the victim of identity theft or bank fraud, that can show up on your ChexSystems report, too.

When you get your report, review everything very closely. Are your name, birth date, address, and Social Security number correct? Have you had accounts at all the banks listed? Sometimes there are mistakes hidden right there in the basics.

Protecting your rep: how to remove info from your ChexSystems report

Getting a bad ChexSystems report can feel a lot like finding out there’s a black mark on your permanent record. It’s no fun realizing that your bad day could turn into a bad decade. So, is there any way to recover, or is one mistake going to tarnish your good name for the rest of time?

No need to panic. Negative items generally stay on your ChexSystems report for 5 years, but there are ways to challenge information and maybe even get some items cleared off your report early.

  • Fix what can still be fixed.

    If you owe money on an old account due to an overdraft or withdrawal that put your account into the red, pay up.

  • Request a settlement, if needed.

    If you owe more than you can pay, talk to the bank to see if they’re willing to settle. Sometimes financial institutions are willing to take a portion of what’s owed, sometimes waiving fees and interest if you pay off the principal.

  • Ask the institution to remove or update the offending item.

    Once you’ve made good, ask the bank, collection agency, or credit union to do you a solid by communicating the change to ChexSystems. You can ask for an update or a complete removal of that item, but remember, the institution is under no obligation to agree. So, it can’t hurt to ask nicely.

The process for fixing your ChexSystems issues has a lot in common with the process behind rebuilding your credit. It’s a combination of taking responsibility for past mistakes, settling debts, and asking for forgiveness. In other words, you’ve got to do the work to get good results.

How to dispute inaccurate ChexSystems reports

If you notice inaccurate information on your ChexSystems report, you can—and should—dispute those items as soon as possible. The best way to do that is to use the forms available on the ChexSystems website.

The company clearly outlines its dispute process, which requires lots of supporting documentation to help you make your case. The type of documentation required depends on the inaccuracy in question. For instance, you may submit a police report if you’ve been the subject of fraud or account statements to prove that an account flagged as overdrawn actually has a healthy balance.

You have to be at least 18 years old to communicate with ChexSystems or file a dispute, but an adult can file on behalf of a minor. Investigations are typically completed within 30 days.

Protecting yourself from fraud

If your ChexSystems report reveals evidence of fraud or you’ve been a victim of identity theft in general, you may want to consider a ChexSystems security freeze.

This freeze doesn’t prevent someone from using your personal information, but it does prevent consumer reporting agencies like ChexSystems from releasing your consumer file unless you authorize it. This way, no one can open a new account or apply for a loan in your name unless you give consent.

Can you come back from a bad ChexSystems report?

Life happens, and we’ve all had financial missteps—especially during the pandemic and in the years since. Work-from-home orders, store closures, inflation, and other factors out of your control may have made it all the more difficult to ensure there’s cash in the bank.

As of May 2022, a whopping 64% of Americans were living paycheck to paycheck. While it’s never right to push the financial limits by overdrafting your account on purpose or avoiding paying off your debts, you’re not the only person who’s had to make difficult decisions.

That’s why there are second-chance bank accounts. These accounts, typically offered by nontraditional banks and credit unions, are built for people who might struggle to open an account with a “regular” bank due to questionable ChexSystems reports. These second-chance accounts have a lower bar of entry, but there are usually fewer perks once you’re accepted, too.

With a second-chance bank account, you often lack access to:

  • Direct deposit

  • Overdraft protection

  • Personal checks

By limiting those services, banks can better protect themselves from fraud or costly consumer mistakes. Second-chance accounts may also come with higher fees.

Financial institutions aren’t required to take anyone on as a customer, especially if there’s a history of bad behavior and poor choices. Losing access to a bank account and all that entails can be extremely inconvenient.

However, by learning about ChexSystems and what to do in the face of a bad report, you can take back control of your personal finances and plan for more freedom.

Varo offers consumers access to second-chance banking, which just means that we focus on you as a person, not what you look like on paper. Thanks to our fair banking policies and a plethora of perks, including no monthly banking fees or minimum balance requirements, you can finally stop paying for past mistakes and start investing in your future.

Sign up for a Varo Bank Account today and experience the difference first-hand.

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