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All You Need to Know About ChexSystems and How to Deal With Them

Millennial Magazine- ChexSystems

You have been applying for a new checking or savings account, and you are caught by surprise when your application is denied. You ask yourself, “Why did I get rejected? Where have I gone wrong?”

Perhaps you have unpaid account fees, or you had a previous account closed due to issuing checks with insufficient funds. These are considered as bad banking habits and are closely monitored by credit reporting agencies, particularly ChexSystems.

What is ChexSystems?

ChexSystems is a known credit reporting agency that collects data regarding your checking and savings accounts activities by sending reports to banks and credit unions about the financial behavior of their clients. Although this agency collects data about your banking history, it only apprises banks of your current standing and does not make account opening decisions.

ChexSystems is regulated under the Fair Credit Reporting Act (FCRA). Hence you can access your report for free once every 12 months. In addition, you can ask for a copy of your ChexSystems personal report online or inquire about it via phone, fax, or mail.

Here are the types of information which could be brought up in a ChexSystems Report, to name a few:

  • Number of times you, as a consumer, have applied for opening a checking or savings account, loan, or credit card
  • Checks under your name that have bounced payable to retailers or individuals.
  • Accounts reported as closed by banks or credit unions
  • Whether statements issued under a non-sufficient fund (NFS) have been paid or unpaid
  • Reports on fraudulent activities
  • Abuse of savings account, debit card, or credit card
  • Violation of any financial institution’s policies and regulations
  • Providing false information when you attempt to open an account.

Many of these items are known to stay in your ChexSystem report for five years or more.

Which banks and other financial institutions do not use ChexSystems?

According to the National Consumer Law Center, more than 80% of banks and credit unions rely on Chexsystems for reports to determine whether they will accept an application to open a new account. Hence, finding financial institutions which don’t use ChexSystems may seem like a challenge.

Generally, financial institutions don’t disclose if they use Chexsystems or not when screening applicants. However, if you wish to open an account still, there are fortunately credit unions that don’t use Chexsystems, such as:

  • Navy Federal Credit Union
  • America First Credit Union
  • Southwest Financial Federal Credit Union
  • Aspire Federal Credit Union
  • State Department Federal Credit Union

For banking institutions, here are alternatives you can choose from:

  • BBVA
  • Chime
  • Acorn

If you find yourself unable to open an account in any financial institution such as a bank or credit union because you have been blacklisted, as decided based on a negative report by ChexSystems, here are some tips on how to deal with them:

1. Know your rights when dealing with consumer credit reporting agencies.

Since ChexSystems is regulated under the FCRA, you may invoke your rights as a consumer to dispute, correct, or clarify information reflected under your personal Chexsystems report.

As provided under the FCRA, one of these rights is if ChexSystem has flagged you and this led to the bank or credit union deciding to reject the application, the institution should immediately inform the consumer.

2. You may dispute errors reflected under your Chexsystems personal report.

Under the FCRA, you may request to see and access your personal ChexSystems report once every 12 months, for free. Moreover, you as a consumer have the right to dispute the information provided under your personal Chexsystems report or request an investigation if the data provided is inaccurate or incomplete.

3. You can apply for a checking or savings account in any institution which does not use ChexSystem.

While most banks and credit unions use ChexSystem, there are still institutions out there that choose to steer away from credit reporting agencies. Some of them don’t even check applicants’ records under the system at all.

However, while they may not check your Chexsystems report, they may still look into your credit score. Hence, this is also one thing that you should look out for when you are planning to open a checking or savings account.

4. You can opt for second chance banking.

Don’t feel doomed if you ever are included within any credit reporting agency’s system. Having a Chexsystems file does not mean you are barred from opening an account in any financial institution.

There are second chance banking programs that can allow you to open a bank account by overlooking past negative banking behavior. However, second chance accounts go by stricter regulations and standards that you have to adhere to. So be mindful in reading the terms and conditions before you sign up and submit your application.

The good news is banks that offer second chance accounts may upgrade your account to a standard one if you maintain good financial standing and activity within a period.

5. Pay off your debts.

If what is reflected in your Chexsystems is true, then you should take steps to settle your existing debts and obligations. If your budget is not enough, you may negotiate with your creditors if they are willing to settle at a lesser amount than what was primarily agreed upon.

Once your debts have been settled, you may ask your creditors to remove the information and update your file under ChexSystems. It is crucial to have your payoff information in writing and keep track of the file under the agency if it has already been updated.

Takeaway

Even if your application for a new account may be denied because of a negative ChexSystems report, know that this isn’t the end of the world, and there are still solutions available for you. With research and understanding about the processes and developing subsequent positive financial habits, you still have a chance to work on managing your money better.

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Written by Taryn Barnes

Taryn Barnes is a freelance writer and blogger obsessed with HR, Millennial culture, work life balance, and all things tech.

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