What is ChexSystems?

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In a Nutshell

When you apply for a new checking account, your history with other bank accounts is likely to come under review. Your ChexSystems report — which contains information about any past overdrafts, involuntary account closures and more — could determine whether your application is approved or denied.
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ChexSystems reports contain information about past banking mistakes, including unpaid fees and fraudulent activity.

When you apply to open a new checking account, banks and credit unions may review your ChexSystems report before approving or denying your request.

ChexSystems is a consumer-reporting agency that gathers information about problems you’ve had with checking accounts. ChexSystems reports include, but aren’t limited to, account misuse or fraudulent activity that has occurred within the previous five years.

What’s in a ChexSystems report?

Just like the major national consumer credit bureaus, ChexSystems collects information about a specific set of your activities. But instead of information about your credit history, ChexSystems collects information about your checking account history.

Here’s some of the information you may find in a ChexSystems report.

  • Identifying information like your name, Social Security number and past addresses
  • Unpaid negative balances, including overdrafts or accounts closed involuntarily
  • Suspected fraudulent activity
  • Account inquiries or applications for other bank accounts
  • Unpaid fees
  • Public records

Although some other consumer reports contain negative information from the previous seven years or more, ChexSystems reports generally keep negative information on record for only five years. But each financial institution has its own rules about how much time must pass after a negative incident before you can open a new bank account.

How can I get my ChexSystems report?

The Fair Credit Reporting Act requires ChexSystems to provide you with one free copy of your checking account report each year. See your options for submitting a request through ChexSystems.

You also have the right to pull a free copy of a ChexSystems report used in a decision to deny your application for a new account. After you’ve been denied, the bank or credit union is required to give you an “adverse action” notice, which will include contact information for the company that provided the report.

What do I do if I’ve been denied a checking account?

Consider other options

Being denied a checking account because of your banking history is not the end of the road. If you’ve been turned down for a standard checking account, a good option may be to apply for a lower-risk product, like a second-chance checking account.

Lower-risk accounts usually come with higher fees and lack some of the features of standard checking accounts, like overdraft protection or debit cards, but they can allow you to start building a better checking history.

Prepaid cards can also work as an alternative to standard checking. A prepaid card account can receive both check and cash deposits. Like many low-risk checking accounts, prepaid cards are likely to come with monthly fees, but some banks will waive fees if you have recurring direct deposits made to the account.

Of course, shopping around is always a good idea. If you’ve been denied a checking account because of information contained in your ChexSystems report and you aren’t interested in alternatives, you could apply for a checking account at other banks or credit unions that may have different requirements.

Dispute errors

If you’ve been denied a checking account because of inaccurate information in your ChexSystems report, you should file disputes with both the bank that provided the inaccurate information and ChexSystems. Both must investigate your claim and correct any inaccuracies.

To file a dispute with ChexSystems, you can use the contact information provided in your adverse action notice or contact ChexSystems directly.

Where to file a ChexSystems dispute

Online: chexsystems.com

In writing:

ChexSystems Inc.

Attn: Consumer Relations

PO Box 583399 Minneapolis, MN 55458

Bottom line

Just like credit reports, ChexSystems reports could contain information that is inaccurate. That’s why it’s a good idea to pull all of your consumer reports on a regular basis. Doing so allows you to check for errors and see how you might make improvements before you find your application for a new account denied.

About the author: Sarah C. Brady is a San Francisco–based financial consultant, workshop facilitator and writer. In addition to writing for Credit Karma, Sarah writes for Experian, LendingTree, Magnify Money, MSN News and more. In her … Read more.