What Is ChexSystems and How Does It Affect You?
ChexSystems is an agency that collates checking account history. During an account application with a bank or a credit union, they can access this information. Having a previous account that closed with an outstanding debt can affect your checking account application, even if your credit score is good.
ChexSystems records do not prohibit a consumer from having a checking account. Each bank has its own rules and must make its own decision in accordance with those rules. The important question is what the record shows. Does the record show an unpaid balance? Is there an error? Is there suspected fraud? Is the record showing an account that the consumer does not recognize? Each of these calls for a different response.
What banks can learn from ChexSystems
Reports may include account applications, openings and closures, reasons for closure, and check writing history. Negative information may be an uncollected balance after a bank closed an account or suspected account misuse. Problems on joint accounts may be reported as well. Just because there is one overdraft on a statement does not mean the bank is reporting negative information.
This file is independent of your Experian, Equifax, and TransUnion credit reports. This file is not a list of your credit-card and loan payments. Checking your ChexSystems report yourself does not impact your credit scores.
ChexSystems provides a separate consumer score that may also be considered by a financial institution. This score provides a risk summary, and the disclosure report provides the records that are reviewed. When a financial institution tells you that you have a “low score,” ask which score they are referring to. An individual’s familiar credit score and the ChexSystems score are different measures.
Information about deposit accounts can also be supplied to lenders. Thus, a review of a consumer’s bank-account history by a lender may be broader than a standard credit report. ChexSystems provides information; it does not make a decision to approve or disapprove an account or loan.
Get the report the bank actually used
You are entitled to receive an adverse action notice from a bank if your consumer report was the basis for any part of the decision made by the bank to take an adverse action against you for opening a deposit account. The notice must identify the consumer reporting agency and explain your rights to receive the agency’s report free and to dispute its accuracy. The notice should also state that the agency did not make the decision to take the adverse action against you.
There may not be a complete explanation in the notice for why the bank made its decision. To get clarity, contact the bank and ask which rule or which account/entry caused the exception. Don’t assume the bank used ChexSystems as the reason for denying the account. It could’ve used Early Warning Services or another company to provide the information or report. It could have used another source to provide the information.
You can obtain a ChexSystems disclosure free of charge at least once per 12-month period. You are also entitled to a free report after a denial based on that report. Ask for it within 60 days after you receive the notice.
The CFPB’s ChexSystems contact listing includes the official site and these ways to request your report:
- Phone: 800-428-9623.
- Mail: Address your request to Consumer Relations at Chex Systems, Inc. Use P.O. Box 583399 in Minneapolis, MN, ZIP 55458.
Request the consumer disclosure report to review the entries. Consumer scores are available for free. Request them to receive a free score. If you are ordering online, use the site reached through the listing, and follow the site’s identity-verification procedure. Only send your personal documents to verified addresses.
Read the entry, not just the negative label
Begin with the name of the institution and account. A bank may have changed names, and a joint account may be familiar even if the reported problem is not. Match your entry to your statements to decide if it is your entry, if it is correct, and if it is still unpaid.
Personal info also helps. An unexpected address or bank account ID may help explain linking of another individual’s record to your file.
| Detail to check, if shown | What may need attention | Useful supporting record |
|---|---|---|
| Institution and account details | The account is unfamiliar, or belongs to someone else. | Account-opening or ownership records; identity-theft documentation where relevant. |
| Closure date and reason | The reported event differs from the bank’s explanation. | Closure notice, final statement, or correspondence about the closure. |
| Amount owed and payment status | A payment is missing, or a resolved balance still appears unpaid. | Payment receipt, settlement confirmation, or bank letter showing the final balance. |
| Application or inquiry | You do not recognize the institution or application date. | Your application confirmation, or the institution’s explanation of the inquiry. |
Closure, report, or update dates can be found in many places. These dates are NOT interchangeable. Before asking for a correction on a date you think is wrong, determine what type of date it is.
For a joint account, compare the bank’s records for ownership against the bank’s explanation for the loss. Being surprised by a co-owner’s activity does not, by itself, prove the reporting is inaccurate.
If the account is not yours
Contact the financial institution’s fraud department and dispute the account with ChexSystems. If you believe your identity was stolen, go to IdentityTheft.gov to create an identity theft report and recovery plan. Make sure to keep the report with your dispute records.
A ChexSystems security freeze can help restrict access to your file and help prevent the unauthorized opening of accounts. You can request a freeze from ChexSystems separately from freezing your files at the three major credit bureaus. A freeze will not remove an existing entry. A freeze can also affect your own application, so make a temporary lift request if the bank needs to access your file.
Dispute the specific error
You can dispute incomplete or inaccurate information with the reporting institution and with ChexSystems. An investigation is free. Identify the entry and state what is incorrect. Explain what the entry should say. Attach copies of documents that substantiate your dispute. Keep originals and a copy of the dispute.
Hypothetical example: An account is shown to have a closing unpaid balance of $180. Bank records show the full $180 was paid later. The issue is the unpaid balance status. The receipt doesn’t change the fact that the account was earlier closed, and therefore payment isn’t the reason to remove the earlier account history.
Use the dispute instructions in your disclosure or on the official ChexSystems site. Dispute the report to the reporting institution’s designated dispute address. Make sure you have a confirmation or proof of delivery for each so that you will have documentation as to when each party received your dispute.
Under federal law, a reporting agency generally has 30 days after receipt to investigate. Some cases allow up to 45 days. Disputes that are filed after a consumer receives their free annual disclosure or when relevant new information arrives during the initial investigation may fall under the 45-day case. Results generally have to be sent to the consumer within 5 business days of the completion of the investigation. The CFPB has more information on these deadlines. State law may require reporting agencies to meet a shorter deadline.
Read the final result against the change you requested. If an error is still present, identify the unanswered point and provide new evidence. Inaccurate, incomplete, or unverifiable information must be corrected or removed. Disputing verified accurate information does not require the removal of that information.
Upon examining the bank debt, you will want to check your credit report and collection records. Should there be an error, dispute the credit-reporting agency that has it. A correction made to your ChexSystems record will not guarantee a correction on your collection record.
When the old balance is accurate
You can contact the institution to repay the balance or to accept a settlement. Before you make a payment, confirm that you have the terms of the settlement in writing. After you make the payment, ask the institution to provide you with confirmation of the paid final balance and ask the institution to update their reported status to show the paid balance. You should also check if the ChexSystems record has been updated to show the resolved status.
Payment and deletion are different outcomes. A true closure can remain even if the debt is resolved. A bank may take a paid balance into account when reviewing a new application, but payment does not guarantee approval.
Per the Office of the Comptroller of the Currency, negative information generally stays in a ChexSystems file for five years. This is different from the Federal law, which says that some negative information may be reported for as long as seven years. So, if you see something on your report that looks too old, ask ChexSystems what date they use for their retention. Do not assume a later payment restarts that period.
Finding an account while the record is being resolved
You don’t always need to wait for all of the inaccurate entries to disappear. Some banks or credit unions provide second-chance checking or other accounts for people with past issues with banking. Some banks or credit unions may require old charges to be paid first. Others may have different features with the account.
Prior to submitting an additional application, describe the issue and check whether your account’s screening policy would allow for a second chance. “Second chance” does not mean that no report would be checked. A clear report does not mean that you would be accepted since the institution may have other eligibility requirements.
Make sure you use your accounts according to how you need them. For example, do you need to receive your pay through your account? Do you need to pay your bills through your account? Can you deposit cash through your account? Are you allowed to use your account to take out money through an ATM? Typically, you should care more about the actual features of an account over how it’s labeled. So, for example, you should care about whether or not a checking account has fees, a minimum balance, and check writing. You should also ask about what happens if you overdraft or what happens if you have a payment that exceeds the money in your account.
If the bank will consider a request for reconsideration after a correction or payment, find out what they need to see and whether you need to apply again. In that case, you would know what the next step is: correct your record, show that you resolved the balance, or choose a bank account with terms you are eligible for.