ChexSystems: Like a Credit Score for Your Banking Habits

A man uses his credit card to make a purchase online.
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You’re probably well aware of the existence (and importance) of credit scores, even if you couldn’t cite your own off the top of your head.

But did you know there’s a similar consumer reporting system for your banking habits? It’s called ChexSystems — and just like your credit report, your ChexSystems report could have serious effects on your future financial endeavors.

Here’s what you need to know about this often-overlooked reporting agency and how it could impact your money.

What is ChexSystems?

ChexSystems is a consumer reporting agency that collects banking-related information, such as account inquiries, misuse, fraudulent activity and unpaid fees. In short, it’s a lot like a credit score for your bank account — and just as lenders often pull your credit report before deciding whether or not to offer you a loan or line of credit, some banks will request a ChexSystem report before allowing you to open a checking account.

However, unlike your FICO score (the three-digit credit score consumers tend to be most familiar with), the negative information on your ChexSystem report is generally removed after five years as opposed to seven. 

That’s a good thing, because without a bank account it’s difficult, if not impossible, to pay certain bills, especially in the all-digital-everything age of automated electronic payments. 

A bank account also keeps your money more secure than it is in your piggy bank, and certain accounts even pay interest. In short, you probably want a checking account — and if your ChexSystems report doesn’t pull up clean, it could be more difficult to open one.

What Shows Up on a ChexSystems Report?

So what kind of activities are reported by ChexSystems?

Well, just as your credit report does, your ChexSystems report will list a variety of personal identifying information, including your name, address(es) and Social Security number.

But the majority of the report will focus on your banking history — particularly any history you’re eager to forget, including:

  • Negative balances, such as existing unpaid overdrafts or involuntarily closed accounts
  • Unpaid banking fees 
  • Fraudulent or suspicious activity, including identity theft
  • Account inquiries and applications
  • Public records, such as bankruptcies or judgments 

Just like the major credit bureaus, ChexSystems is governed by the Fair Credit Reporting Act, which means you’re entitled to one free copy of your ChexSystems report every calendar year. You also have a right to a ChexSystems report if a bank uses its information to deny your application for a checking account. You can learn more about pulling your free annual report here, and you can also see a sample report if you’re curious to know what it might look like.

If you find an error on your ChexSystems report, you can (and should) report it immediately. You can do so easily online by filling out the ChexSystems online dispute form, or by mail or fax

Most ChexSystems investigations are completed within 30 days of filing a dispute.

What to Do If You Have a Negative ChexSystems Report

If your ChexSystems status is keeping you from opening a checking account, the good news is you have options. 

Some financial institutions offer “second chance” bank accounts for those with negative histories, though they do sometimes come with additional fees. These are more common with online-only banks, like Chime, but some major nationwide banks offer similar options. For example, Wells Fargo’s Opportunity Checking account is available in 39 states and Washington DC, and offers some attainable ways to avoid its $10 monthly service fee. 

You may also be able to use a prepaid debit card to settle bills that are tough to pay in cash, like utilities. Although some prepaid cards come with monthly fees, you can often get them waived with recurring direct deposits.

Whether your ChexSystems report is clean as a whistle or could use some TLC, the first step is to educate yourself. If you’ve never heard of this consumer agency, go ahead and request your free report today. In this case, knowledge really is power — the power to open a checking account that could help you better manage your money.

Jamie Cattanach’s work has been featured at Fodor’s, Yahoo, SELF, The Huffington Post, The Motley Fool and other outlets. Learn more at www.jamiecattanach.com.