ChexSystems: Everything You Need To Know

Ben GranBanking Reviewer and Writer

Ben Gran is a freelance contributor for Forbes Advisor on banking. He also writes for The Ascent (a Motley Fool service), where he covers insurance, credit cards, personal finance and investing. Ben has over 10 years of experience as a freelance content writer for regional banks, tech startups, and financial services companies like LendingTree and Prudential. He also works as a ghostwriter for business executives, with bylines in publications such as Fast Company, Entrepreneur and TechCrunch.

Ben Gran

Ben GranBanking Reviewer and Writer

Banking Reviewer and Writer

Doug WhitemanEditorial Director, Financial Services

Doug Whiteman is an award-winning journalist with three decades of experience covering personal finance, starting when he was the Washington, D.C.-based consumer news editor and reporter for Associated Press Radio in the 1990s and early 2000s. He's passionate about making financial information clear and useful for consumers — taking personal finance from "Huh?" to "Ah!" He has been quoted by numerous media outlets including The Wall Street Journal, CBS News and USA Today.

Reviewed

Doug Whiteman

Doug WhitemanEditorial Director, Financial Services

Editorial Director, Financial Services

Reviewed

Updated: Aug 6, 2020, 7:12pm

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ChexSystems: Everything You Need To Know

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While you may be familiar with the three major credit reporting agencies that look at your overall financial health and provide credit reports, you may or may not be aware of an agency that tracks your banking behavior.

This agency is called ChexSystems. If you have ever had a checking or savings account closed by a bank because of too many overdrafts or other problems with your account, you may have ended up with your name in the ChexSystems files. Having a low ChexSystems Consumer Score, similar to having a low credit score, can cause you to be declined access to a new bank account.

Learn more about ChexSystems, how it affects your financial life and how you can get your banking reputation back on track.

What Is ChexSystems?

ChexSystems is a bank account screening consumer reporting agency (CRA). It works behind the scenes of the financial system to help banks and financial institutions prescreen new customers applying for bank accounts. Banks use ChexSystems to decide which customers may—based on their prior behavior—be at higher risk for misusing or mismanaging their bank accounts.

According to the National Consumer Law Center, over 80% of banks use a bank account screening CRA, like ChexSystems, to evaluate whether to approve customers for a new account.

How Does ChexSystems Work?

ChexSystems keeps track of your checking and savings account activity. It then generates a report for banks and credit unions that shows your activities and the reasons an account was closed. Customers’ errors, misuse or irresponsible management of the account (such as repeated overdrafts), failing to pay account fees, suspicious activity and fraud are all examples of activities that might land on your ChexSystems report.

If you have a history of bank accounts being closed for negative reasons, your information will stay on your ChexSystems file for up to five years.

How Do I Know If I Have a ChexSystems File?

Many people never have an issue that requires them to investigate their own ChexSystems file. If you’ve been able to apply for and open a new bank account recently without any delays or declines, it’s a good sign that your ChexSystems file is in good order.

However, the Fair Credit Reporting Act (FCRA) allows consumers to access their ChexSystems report for free once every 12 months. You can request a copy of your personal ChexSystems report online. It’s also available by phone, fax or via mail request form.

If you have no prior history of accounts being closed due to problems or misuse, your ChexSystems report will be short and simple, as in the example shown below.

But if you have negative events in your account history, your ChexSystems report will include details on reported information and past transactions. You may find that banks have reported you to ChexSystems for failing to pay fees, failing to use accounts properly or otherwise having problems with your bank accounts that caused your accounts to be closed.

What Is My ChexSystems Score?

ChexSystems assigns each person a Consumer Score based on how risky they are to open a bank account. The ChexSystems score ranges from 100 to 899, with a higher score indicating lower risk. You can request your personal ChexSystems Consumer Score via mail or fax.

Unlike a credit score, which you may track closely to monitor your overall creditworthiness, your ChexSystems Consumer Score will usually not be important to your everyday financial life. You are welcome to request your ChexSystems score, but you probably don’t need to know what your score is, unless you have been declined for a bank account and want to know why it happened.

The ChexSystems Consumer Score is typically more useful to banks than it is to consumers. Unless you have had a history of serious problems with managing a bank account, you usually won’t have to think about your ChexSystems report or ChexSystems score at all.

What If My ChexSystems Report Is Incorrect?

If there is information in your ChexSystems report that is false, incorrect or that was added to your report by mistake, you have the right to file a dispute and ask to have your report corrected. This is especially important if you have been declined for a new bank account and want to clear up your reputation and risk profile so that you can keep banking.

Learn more about how to submit a ChexSystems dispute.

What Rights Do I Have When Dealing With ChexSystems?

ChexSystems is governed by the FCRA, and just as with consumer credit reporting agencies, you have certain rights as a consumer to dispute, correct and get clarity about the information that ChexSystems collects.

Some of your key rights include:

If your ChexSystems report has been used against you, you have the right to know. For example, if you apply to open a new bank account, and the bank rejects you because of bad information that was listed in your ChexSystems report, the bank is required to inform you.
You have the right to see your own personal ChexSystems report (for free) every 12 months. Even if you have not been rejected for a new bank account, you may want to set a reminder on your calendar to request to see your ChexSystems report once per year. It doesn’t hurt to make sure the information is accurate and that your reputation is clean.
You have the right to submit a dispute and request an investigation of inaccurate or incomplete information in your ChexSystems report. Information that is found to be inaccurate must be corrected or removed from your report within 30 days.

Can ChexSystems Help Victims of Identity Theft?

If you become a victim of identity theft, ChexSystems offers a Security Alert that lets you freeze your ChexSystems account. By freezing your account, you’ll ensure that fraudulent accounts opened by an identity thief do not end up on your personal ChexSystems report. In case you are ever a victim of identity theft, make sure to contact ChexSystems as well as your financial institutions to explain the situation and sign up for whatever account freezes are available.

If you report identity theft to ChexSystems, ChexSystems is required to block these fraudulent accounts from being added to your report. You’ll need to provide proper documentation for accounts fraudulently opened as the result of identity theft.

What Should I Do If I Have Been Declined for a Bank Account Because of a ChexSystems Report?

If you have applied for a new bank account and been rejected, ask the bank why. If they have identified your ChexSystems report as the reason, you have the right to know. You also have the right to talk with ChexSystems, access your report and dispute any inaccuracies.

Here’s what you should do next:

Contact ChexSystems to request a copy of your personal ChexSystems report.
Review the report, and look for errors or inaccuracies. Check for bounced checks, identity theft, accounts you don’t recognize and any previously resolved issues with a bank that are not being depicted fairly.
If there is any incorrect or inaccurate information in your report, you can file a dispute with ChexSystems. They are required to investigate. Incorrect information is usually corrected or removed within 30 days.

Will My ChexSystems Report Keep Me From Getting a Bank Account?

If you have a negative event in your banking history, and your ChexSystems report contains closed accounts, you may have trouble opening a new bank account. But having some bad news in your ChexSystems report doesn’t mean you have to be unbanked and shut out of the financial system. Many banks offer “second chance checking accounts” to people who have troubled banking histories.

Second chance checking accounts may have fewer features or lower limits than regular bank accounts, but they can be a good way to maintain a positive banking history and get back into the financial system.

Banks and credit unions rely on ChexSystems for help in prescreening customers interested in opening checking and savings accounts. The service helps financial institutions manage risk, avoid fraud and weed out bad actors who abuse or mishandle their bank accounts.

If your name ends up on the list of people with bad banking histories, you’re not locked out of the banking system forever. Be ready to review your ChexSystems report and file a dispute if you find any inaccurate information. And consider applying for a second chance checking account to rebuild your reputation as a responsible bank customer.