If you’re concerned with your [1]
credit score and general financial healthy, you’ve probably heard of
Experian, Equifax, and TransUnion. They collect information about how
much available credit you have and how you use it. What you may not be
aware of is that there’s a similar group who monitors how you bank.
ChexSystems is a consumer reporting agency which compiles a report of
everything that your banks have reported in your last 5 years
of banking. But unlike credit reports, Chex reports only contain
negative information.
When you’re joining a new bank, you may be denied an account if your
Chex report includes enough negative items (even 1 may do it). It’s the
bank’s way of protecting themselves (and their other customers).
Unfortunately, if you have a good history overall, a few mistakes may
make banks consider you too much of a risk.
What’s In a ChexSystems Report?
A number of things may go into a ChexSystems report. If you
frequently overdraw your account (bouncing checks) or if you deposit a
lot of bad checks, that may show up on your ChexSystems report. If your
bank thinks that you’re trying to defraud them or defraud others through
your account (using it to run a [2]
419 scam would be
a random example), they may report it to your ChexSystems report.
One thing that’ll definitely be on your ChexSystems report: unpaid
balances with the bank itself! Overdraft charges, fees, unpaid lines of
credit, if you owe them and don’t pay, it’ll end up on your ChexSystems
report.
The good news is that ChexSystems doesn’t automatically see your
account activity, your bank has to choose to report it. So if
you bounce a few checks but clear everything up right away, your bank
may not report it at all. Often banks have guidelines about what does
and doesn’t get reported. But if you let your account remain delinquent
for 3 months or if you commit fraud, it’ll probably end up in your
report.
Can I See My ChexSystems Report?
Because ChexSystems is under the same rules as the three credit
bureaus, you can [3]
order your ChexSystems report once a year and if you’ve been denied
a bank account because of it in the last 60 days. (You can get free
copies of your credit report from each bureau, once a year at [4]
annualcreditreport.com.)
And you can [5]
place an alert with ChexSystems if your ID has been stolen, just as
you do with the credit reporting agencies.
How Can I Improve My ChexSystems Report?
First, the ChexSystems report only contains information from the last
5 years. Anything before then doesn’t count. So start by getting your
financial life in order going forward. If nothing else, time will take
care of it. Also, some banks will still let you open accounts as long as
you don’t have any issues from the last year and have paid everything,
so a problem in a ChexSystems report may not keep you from
getting a bank account.
In getting your finances straight, talk to a bank representative
about how you can fix the problems they’ve reported. Work with them to
figure out you can pay and what the bank will accept. If you’re somehow
in too deep, the bank may be willing to settle for less than the amount
owed. So don’t give up if it seems too big, remember that the bank would
rather have some money than nothing.
Once you’ve paid your bank, you can request that they ask ChexSystems
to remove the incident entirely. The bank is required to update
the information by adding that you’ve paid or settled the account, but
they’re not required to ask that it be removed. Remember this when
you’re working with the bank representative. Politeness can pay off big.
If your ChexSystems report includes errors, you may [6]
file a dispute just as you can with credit reports.
Can I Get a Bank Account Despite a Bad ChexSystems Report?
Maybe. A lot of it depends on what’s in your report and which banks
you try. A good place to begin is [3]
getting your annual free copy. Of course, if you’ve just been denied
because of ChexSystems you’re also entitled to a free copy.
Talk to all the banks and credit unions in your area, different ones
have different approaches and some don’t even check with ChexSystems. If
they’ve denied you, ask to meet with someone from the institution and
find out if they offer you any other options or if they know of
reputable banks which will offer you second chance bank accounts. For
example, Wells Fargo has what they call [7]
“opportunity accounts” for people with poor banking or credit
history.
If you have any bank accounts open, don’t close them unless there’s
something very wrong with the bank. By “wrong” I mean that the bank is
mishandling your payments, losing your money, or something dramatic. If
you’re having trouble opening a new bank account, then you may have to
put up with monthly fees, low interest, etc for now. You can try opening
other accounts, but don’t close the old one until you have a new account
established.
