What Is ChexSystems? | Bankrate

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If you apply for a new checking account and your application is denied, it may be because of a negative report of your banking history by ChexSystems.

What is ChexSystems?

ChexSystems is a specialty consumer reporting agency operating under the Fair Credit Reporting Act. It is similar to a credit bureau, but it tracks consumers’ deposit and debit history, rather than their ability to pay bills on time. Generally, ChexSystems reports on blemishes in banking history, such as overdrafts and unpaid fees.

“A history of overdrawn accounts will be reflected on your ChexSystems report and could stand in the way of getting a new checking account much the way a history of loan defaults would make prospective lenders unwilling to extend credit,” says Greg McBride, CFA, Bankrate chief financial analyst.

How does ChexSystems work?

ChexSystems helps financial institutions assess the risk of accepting customers. The reporting agency collects information about consumers from banks to create a report and issues a risk score based on that information.

ChexSystems issues consumer disclosure reports, which include details such as suspected fraudulent activity on any accounts under your name, non-sufficient funds activity and returned checks. You’re entitled to a free copy of this report once every 12 months (or more frequently under certain circumstances). In addition to requesting your own copy, banks rely on consumer disclosure reports to determine whether to grant a customer access to a bank account.

Based on the information in your disclosure report, ChexSystems will assign you a consumer score between 100 and 899. The higher your score, the lower risk you present to a bank as an account holder.

Consumer reporting agencies, like ChexSystems, must follow certain regulations, such as reporting information accurately and investigating disputes by consumers in a timely manner. ChexSystems is overseen by the Consumer Financial Protection Bureau and the Federal Trade Commission.

What information banks report to ChexSystems

The CFPB website lists common reasons why consumers may have a negative consumer disclosure report:

• Unpaid negative balances (as a result of overdraft fees, for example)
• An involuntary closure of an account
• Suspected fraudulent activity
• Owning a joint account with someone else who had one of these problems

Overdrafts in consumers’ banking history can result in serious consequences, as the consumer is often forced to use expensive financial alternatives to handle routine transactions, such as nonbank check cashing. When someone doesn’t have access to a bank account, they’re considered unbanked. In 2023, 4.2 percent of U.S. households— representing about 5.6 million households— were unbanked.

Are credit reports also part of the review process?

ChexSystems reviews banking history, not credit history. There are three credit bureaus that supply credit reports, and the information stored by the credit bureaus is separate from ChexSystems. In other words, bad credit doesn’t necessarily affect your ability to open a bank account. But good credit also won’t help you get approved for a bank account if ChexSystems reports a negative banking history.

How to get a copy of your ChexSystems report

You can get a free copy of your ChexSystem report once every 12 months. Here’s how to get a copy of your report:

1. Register for an account on the ChexSystems website.
2. Share your personal identifying information.
3. If you would prefer to request your copy via snail mail instead of online, you can print out the form available on the website and mail it to the correct address listed.

You can also call ChexSystems at 800-428-9623 to speak to a representative between 8:00 a.m. and 7:00 p.m. Central Time, Monday through Friday.

I’ve been denied. Can I get a bank account?

If you’ve been blacklisted by ChexSystems, you still have options.

• Look for a bank or credit union that offers second chance checking accounts: Second-chance checking accounts may involve a monthly fee, a minimum balance requirement or both, but it gives consumers the opportunity to show that the account can be managed responsibly. These are specifically designed for those who have struggled to manage their money in the past and have a history of overdraft fees or other issues.
• Consider safe checking accounts, too: Some financial institutions offer other low-risk accounts that you might qualify for, such as safe checking accounts that don’t offer checks but provide a debit card.

How long do you stay on ChexSystems?

According to ChexSystems, records of consumer reports are generally kept for five years from the report date, but consumers can request removal of a report earlier than five years if it is out-of-date or incorrect by submitting a dispute. ChexSystems usually takes 30 days to investigate a dispute, after which it may remove your report.

Bottom line

Banks and credit unions use information provided by ChexSystems to determine the risk level of a consumer. It’s important to be aware that your banking history of the last five years is stored by ChexSystems — if you’re not approved for a deposit account, it’s likely because of something in the ChexSystems report, like an involuntary checking account closure.

Look out for errors in ChexSystems reports and dispute them, so that incorrect information won’t affect your ability to open an account. If you’ve been blacklisted by ChexSystems for a negative banking history, there are second-chance or safe bank account options available.