Banker studying ChexSystems report.
Jordan Schneir
By: jordan_shneir
Read in 9 minutes

What is ChexSystems?

In order to effectively manage your company’s finances, you’ll need to open a small business bank account.

But what happens when you’re not able to open a bank account? 😱 

Many people don’t know this, but just like there are credit reporting agencies to monitor your credit history, ChexSystems exists to monitor your banking history. 

Banks and credit unions all around the country rely on ChexSystems reports in order to determine whether or not they approve customers for new bank accounts.

Let’s take a quick look at what ChexSystems is, how you can see your report, and how you can maintain a good banking record.

What is ChexSystems?

ChexSystems is a consumer reporting agency that maintains people’s banking records. Whenever you apply to open a new bank account, the bank or credit union can use ChexSystems to look at your banking history before approving you.

Just like how credit reporting agencies, like Equifax, collect data on your credit card and loan history, ChexSystems tracks your banking history.

Your ChexSystems record does not have any impact on your credit score. Instead, it is typically only used to determine whether or not you can open a checking or savings account and write checks.

If you apply for a bank account and are rejected, chances are it’s because the bank found something bad in your ChexSystems report.

What Does a ChexSystems Report Contain?

ChexSystems reports only contain negative information, meaning anything that might cause a bank to reject your application. While most people do have a ChexSystems report, those with a completely clean banking record may not have a report at all.

Items that might be found on a ChexSystems report include: 

  • Bounced/Fraudulent Checks
  • Overdrafts
  • Involuntary Account Closure
  • Suspected Fraud
  • Suspected Identity Theft
  • Unpaid Negative Balances
  • Frequent ATM Abuse
  • Inquiries
  • Lost Debit Cards
  • Lost Checks
  • And More

Essentially, anything that may be cause for concern can be reported to ChexSystems. Keep in mind, though, that each bank has its own reporting policies. Some banks may not report certain activities that other banks do report.

How Long Do Items Stay on a ChexSystems Report?

If you do have a few too many items on your ChexSystems report, it’s important to know how long they’ll stay on there. 

According to the ChexSystems’ FAQ, items remain on your report for five years after the report date unless you request removal or there is another applicable reason for removing the items.

How Can I Get My ChexSystems Report?

If you want to see what is on your own ChexSystems report, it’s fairly easy to do so. 

Under the Fair Credit Reporting Act (FCRA), ChexSystems is required to provide you with one free copy of your report every year. If you want to request your free annual report, you can review your options here.

Additionally, if you are denied after applying for a bank account, the bank or credit union is required to provide you with an ‘adverse action’ notice, which includes the information for the company that provided your report.

What Can I Do if I’ve Been Denied a Checking Account?

If you’ve been denied for a checking account, don’t worry, you’re not completely out of luck. Consider these options if you’ve been denied a checking account due to your ChexSystems report.

Explore Alternatives

First and foremost, you might be able to open a bank account at a local bank or credit union. Local institutions are often more lenient when it comes to your ChexSystems report.

Some ChexSystems banks also offer second chance checking accounts, which are meant specifically for people with poor banking records.

Lastly, you might consider opting for prepaid debit cards as an alternative to a traditional checking account.

Dispute Incorrect Information

In some cases, people may be denied a bank account due to false information on their ChexSystems report.

If you believe your report contains false information, be sure to file disputes with ChexSystems and the bank that denied your application. 

To dispute your report, use the contact information provided in the ‘adverse action’ given to you by the bank that denied your application.

How to Remove Your ChexSystems History

If your ChexSystems report is stopping you from opening a bank account, here are the steps you can take to clear your record.

  1. Request Your Report

You can only remove information from your ChexSystems report if it is inaccurate. Otherwise, you’ll have to wait the standard five years.

Of course, the only way to know if the information on your report is inaccurate is to see the report for yourself. As such, the first step is to request your report. To do so, use the information provided above in the ‘How Can I Get My ChexSystems Report?’ section.

  1. Dispute False Information

After confirming that there is false information on your report, the next step is to dispute it using the contact information provided in the ‘adverse action’ given to you by the bank or credit union.

Be sure to address the information that you believe to be inaccurate, send the letter via certified mail with return receipt requested, and keep a copy of the letter for your personal records.

The FCRA requires ChexSystems to either confirm that the information in your report is accurate or remove the information from your report within 30 days of receiving your dispute.

  1. Follow Up

The last step is to follow up on your dispute. Of course, if ChexSystems does remove the information, then this step is unnecessary.

If, on the other hand, ChexSystems hasn’t cleared your report, you can send another letter requesting to see proof that the information on your report is accurate. You should also follow up with the bank that denied your application. 

Be sure to reference the FCRA and the rights that it gives you as a consumer to verify the information on your ChexSystems report.

Other Tips for Maintaining a Good Banking Record

As you can see, it can be very difficult to open a bank account with a poor banking record. As a result, it’s important to do what you can to maintain a good banking record.

To keep your banking record clean, try following a few of these tips:

  • Sign up for overdraft protection to prevent overdrafts from appearing on your report.
  • Constantly use online banking to monitor your bank account.
  • Never write checks that you aren’t able to cover.
  • Understand your rights as a consumer under the FCRA.
  • If you close a bank account, give your bank updated contact information in case they need to contact you after closing the account.

Ultimately, while some things may be out of your control, you can maintain a clean banking record simply by monitoring your balance and being careful to avoid overdrafts, bounced checks, and similar instances.

Final Thoughts

ChexSystems exists to give banks a way to evaluate potential customers before letting them open a new bank account.

Since a poor ChexSystems report can stop you from opening an account, it’s important to know what ChexSystems is, how to obtain your report, how to dispute false information and ways to maintain a clean banking record.

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