Most consumers aren’t familiar with ChexSystems until they’re denied a new bank account or a merchant declines to accept their check. Briefly, ChexSystems is a consumer reporting agency (CRA) that tracks your checking and savings account activity. It’s similar to credit reporting agencies Equifax, Experian and TransUnion, which collect data on consumers’ loan and credit card history. A ChexSystems record doesn’t affect your credit score and doesn’t factor in to banks’ decisions to extend credit, but it can impact your ability to open a bank account or write checks.
When you apply for a bank account, most financial institutions will screen your application by checking your banking history. About 80 percent of all banks in the U.S. use ChexSystems data for this process. Some of the rest get similar reports from TeleCheck, Early Warning Systems or other specialty CRAs, while others do not check your banking history at all. A rejection of your application to open an account probably means the bank found adverse information in your banking history as reported by ChexSystems.
Keep reading to learn how your name ends up in the ChexSystems database, what information is included in your report, how to obtain a free copy and more.
Are You In ChexSystems & What’s In Your Report?
Anyone who has ever opened a bank account in the U.S. is likely to have a ChexSystems record. ChexSystems reports only negative information, including every banking transgression you — or someone pretending to be you — committed in the past five years.
It’s also important to note that ChexSystems does not report on your credit history, so it’s never a factor in any loan or credit card application though your ChexSystems Consumer Score may be.
The table below summarizes the information that banks and merchants report to ChexSystems. To see what an actual ChexSystems record looks like, you can check out this sample report.
| Activity | Description | When It's Deleted |
|---|---|---|
| Involuntary Account Closure | Bank closes your account usually "for cause" (e.g., writing too many bad checks or fraud) | After 5 years (unless you successfully dispute the listing or the bank or ChexSystems deletes the listing sooner) |
| Bounced Checks and/or Overdrafts | Usually for multiple instances | |
| Unpaid Negative Balances | Usually for outstanding overdraft/nonsufficient funds (NSF) fees or other charges | |
| Savings Account, Debit Card or ATM Abuse | For risky or dishonest behavior (e.g., depositing empty envelopes at ATM or frequently exceeding transfer limit) | |
| Outstanding Checks in SCAN Database of Returned Checks & Instances of Fraud | Checks issued or sent to a collection agency; returned or fraudulent checks | |
| Suspected Fraud or Identity Theft | For altering checks or providing false information on an application | |
| Inquiries | Initiated by you, a bank, an employer, a creditor, or other "permitted" party | After 90 days or no more than 3 years if initiated by you; otherwise after 5 years |
| Lost Checks & Debit Cards | Routine reporting (not necessarily negative information but can indicate possible fraud) | After 5 years (except check-ordering and application histories and unless you successfully dispute the listing or the bank or ChexSystems deletes the listing sooner) |
| Check-Ordering History from Past 3 Years | ||
| Number of Accounts Applied for in Past 90 Days | ||
| Social Security Number/Driver's License Validation and/or Verification |
Each bank has its own policies regarding which of the above items it will report to ChexSystems. However, there is currently no standardized definition as to what constitutes “fraud” or “account abuse,” according to the National Consumer Law Center. If your report lists “suspected fraud,” ChexSystems won’t distinguish whether you were the victim or the perpetrator. And though some banks will overlook a few bounced checks, others will report this to ChexSystems as abuse of your account, leaving a black mark on your record for a period of five years. The same applies if you leave a negative balance unpaid for a certain period, as some banks will wait as long as 90 days before reporting the issue, whereas others will be far less patient.
Read the section titled “How to Get a Copy of Your ChexSystems Report & Score” for instructions on obtaining your free copy.
How Long Do You Stay In ChexSystems?
According to ChexSystems’ current policy, each entry in your report will be deleted after five years unless noted otherwise in the table above.
ChexSystems isn’t required to delete accurately reported information, but every bank is responsible for updating the payment status on a delinquent account that’s been settled. So even if you pay off an outstanding debt, the status of listing can change, but it won’t be removed from your record until five years have passed. However, ChexSystems can voluntarily wipe out a listing sooner at its discretion.
What Is A ChexSystems Score?
ChexSystems calculates a score of your banking history that they call the QualiFile Consumer Score. An increasing number of banks now use this score to evaluate your risk as a prospective customer. The score ranges from 100 to 899, with a higher score indicating a better risk profile.
But don’t confuse your ChexSystems score with your credit score. The two figures are completely independent of each other and are, for the most part, used for different purposes. But, depending on the creditor or lender, it is possible for your ChexSystems score to affect your ability to obtain a loan or credit. In addition, data from your credit report may be used as factors to calculate your ChexSystems Score.
How To Get A Copy Of Your ChexSystems Report & Score
Under the Fair Credit Reporting Act (FCRA), you are entitled to a free copy of your report once every 12 months or if you’ve been rejected by a bank in the past 60 days. ChexSystems is not required to provide a free copy of your score, however, so while you can purchase a copy of your score at any time, it will not be included in your free report.
Upon receiving your request, your ChexSystems report or score will arrive by mail within five business days. Below are instructions for obtaining your information.
| Method | Requirement | Contact Info |
|---|---|---|
| Online
(Report Only) |
Complete an Online Request Form. | consumerdebit.com |
| By Phone
(Report Only) |
Follow the instructions of the automated system. | 800-428-9623 |
| By Fax
(Report Only) |
Print and complete an Order Form. | 602-659-2197 |
| By Mail
(Report or Score) |
For Report: Print and complete an Order Form.
For Score: Print and complete a Score Order Form. Enclose a check/money order for $10.50 made payable to Chex Systems, Inc. |
Chex Systems, Inc. Attn: Consumer Relations 7805 Hudson Rd., Ste. 100 Woodbury, MN 55125 |
How To Get Out Of Or Correct Errors In ChexSystems
There is no easy way out of the ChexSystems database, but there are steps you can take if you are reported in error to the agency. If you don’t recognize a derogatory mark on your ChexSystems report or believe it’s inaccurate, you can report the problem to ChexSystems or to the bank that reported the item you are disputing. To resolve the issue as quickly as possible, we recommend reporting your concerns to both ChexSystems and the bank. WalletHub’s ChexSystems Dispute guide provides further instructions for navigating the process.
Tips For Maintaining A Good Record & Finding Alternatives
The consequences of being reported to ChexSystems can be dire, so it’s imperative to avoid engaging in bad banking behavior. Follow the advice below to help you maintain a positive banking record as well as to find other ways of accessing mainstream financial services if you’re already in the ChexSystems database.
- Sign Up For Overdraft Protection: Setting up overdraft protection for your checking account will prevent your checks from bouncing and your account from being overdrawn. If you don’t bounce checks or overdraft repeatedly, you won’t get dinged for them in ChexSystems.
- Keep Tabs On Your Account: Don’t rely on your bank to tell you how much money you’ve spent or have in your bank account. Use online banking to your advantage, and maintain a check register. When you write a paper check, it can take days or even weeks before the money’s taken out of your account. You should never write a check you can’t cover. But by recording the check and subtracting the amount in your check register, you’ll know that money’s off-limits and exactly how much of your balance is left for you to spend.
- Expect The Unexpected When Closing An Account: Sometimes, automatic recurring payments will still go through even after you’ve deactivated them, which can trigger overdraft fees even after you’ve closed your account. If you have the resources, leave a small amount (e.g., $100 or $200) in your account for a couple of months before closing it for good. During that time, you should turn off all automatic recurring payments or transfer them to a new account.
- Keep In Touch With Your Bank: When you close your bank account, make sure you provide the bank a way to contact you in case you have outstanding obligations (e.g., recurring payments you forgot to turn off and went through) after closure. Send them your new address, especially if you move out of state, your phone number and/or your email address.
- Check Yourself Out In ChexSystems: Don’t wait until you’re denied a new bank account to check your banking history report. Every 12 months, you should proactively request your free copy of your ChexSystems report and make sure it’s free of errors.
- Know the Rules & Your Rights: Understand your bank’s policy regarding ChexSystems reports to avoid any surprises in the future. Some banks stipulate a minimum debt amount or provide a sort of “grace period” before they report you to ChexSystems. Some also conduct “sweeps,” in which a bank will randomly check existing accounts to find customers with ChexSystems records, freeze those accounts and later close them. It’s also useful to know whether they’ll delete a ChexSystems record once you’ve settled a delinquent account.Besides familiarizing yourself with your bank’s ChexSystems policy, take some time to learn your rights under the FCRA. In the event you need to dispute an error in your ChexSystems report, you’ll need to know whether your bank or ChexSystems has violated the FCRA, which will strengthen your case.
While you’re waiting for your ChexSystems record to clear up, you can access checking account services through other means. Many banks offer second chance checking accounts specifically for consumers with bad banking records. These accounts offer all the benefits of traditional checking. Your other option is to get a prepaid card, which is essentially a checking account without the physical checkbook. You’ll spend only the amount loaded onto your card and won’t incur overdraft fees. As you compare these products, however, don’t forget to consider their limitations and fee structures.
Image: Brian A Jackson / Shutterstock
