What Is ChexSystems & How Does It Work?

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Shivangi Gupta
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We all are quite familiar with the technical term ‘CREDIT SCORE’ which reflects our financial credibility but we may or may not have wondered that our banking behavior is also being tracked 24/7 by an agency named ChexSystems. By keeping a thorough check on every transaction, ChexSystems makes sure that a particular account is not indulged in any of the fraudulent, misleading, or unfair practices.  

ChexSystems is an agency that offers its services to almost 80% of banks and financial institutions (according to the National Consumer Law Center) that are looking for a defined banking history of their new applicants. Post-screening, applications with a low ChexSystems consumer score are rejected and are restrained from opening a new bank account. 

Without even having minimal knowledge about it, ChexSystems can have a huge impact on our banking reputation and financial life, and it can be an immense setback during our critical times, therefore this article brings out detailed information about ChexSystems and how it is processed.  

What Is ChexSystems?

ChexSystems is a consumer rating agency (CRA), operated under Federal Fair Credit Reporting Act (FCRA), that keeps a continuous check on your checking and savings account activity and tracks your banking behavior. This record is then considered by banks and trade unions when they receive a new request for opening a bank account by a customer, with the purpose to reduce the possibility of accounts being misused or mismanaged.   

How ChexSystems is Different from CRA (Credit Reporting Agency)?

Credit Reporting Agencies like Equifax, Experian, and TransUnion, render their services to the consumers in the credit markets with an aim to provide them with a clear picture of their customers and let them know their creditworthiness. They collect and analyze your credit history and allot a credit score to you, which plays a vital role when you apply for a new bank loan; whereas ChexSystems Consumer Rating Agency keeps an eye on your overall banking behavior and prepares your consumer report, which comes to use when you apply for a new bank account.     

What Information is Reflected in the ChexSystems Report?

ChexSystems only reflect negative information which means that if you’re able to apply for new bank accounts and they are being opened without any delays or dismissals, you are in good order. 

But if you are facing difficulties in opening a new account or if your current account is being closed/frozen, it means you are in a problem now. Negative information can be in reference to your practice of check kiting, check floating, bounced checks/overdrafts, unpaid balances, applied for a number of accounts in the past 90 days, fraudulent check deposits, or skeptical deeds in the past 5 years. However, you can also be charged a fee amount.    

What are the ChexSystems Score and its Significance?

What is ChexSystems

ChexSystems score (also known as Qualifile Consumer Score) is assigned to every customer defining their suitability to open a bank account. The score ranges from 100 to 899 where a higher score is an indicator of a better risk profile. However, this may not be a big concern until and unless your banking transactions are put to hold, you don’t need to check it on a regular basis, unlike credit score which is meant to be tracked closely.    

How Long Does the Closed Account Stay on the ChexSystems Report?

Having a negative ChexSystems report can be a headache in itself since it can disturb your financial life, thus this is the most common question asked by people. Generally, your account remains in the system for a full five years from the report date unless and until it is requested by the source of information to remove it. 

It can also be updated if you have cleared your dues.   

How can you get a Copy of your ChexSystems Report?

You have the full right to attain the free version of your ChexSystems report every 12 months, whether you are blacklisted or not, as permissible under Fair Credit Reporting Act (FCRA). However, your score is not included in the free copy of your report but you can always purchase it any time. 

You can avail your report via phone, online, or fax, and to attain your score with a report as well, you can go for mail. After receiving your request, your ChexSystems report will reach you in five business days.

Visit Consumer Disclosure (Chexsystems) to get a copy of your Consumer Report

Can you Correct your Report?

If you find a statement against you that is false, misleading, or not true on your part; you can reach out to the concerned bank and agency to show them your side of the picture. It is very crucial to communicate if an inappropriate remark is being a hurdle in your financial life and is not letting you open an account or write checks. 

To put it a little extra pressure, a dispute can also be raised against the bank and ChexSystems. Learn more about filing a dispute by visiting the link below.

Dispute (ChexSystems)  

Tips & Tricks to Keep Up with the Positive Marks

What is ChexSystems

To be straight, no one wants to be in financial trouble with huge fee payments being imposed so a little extra care is always recommended. Below are the tips and tricks to make sure that you are not owning any negative remarks with the ChexSystems :

  1. Keep a check on your transactions and avoid overspending on a regular basis. 
  2. Be in regular touch with the ChexSystems report for a safer side.
  3. Avoid having bounced checks/overdrafts by being extra careful.
  4. If you are closing your account with any bank, close it with some extra dollars deposited in it as sometimes automatic recurring payments keep happening even if it has been closed and that will result in a large amount of overdraft fee piled up for you.
  5. Being extra cautious is never bad so always keep a close check on banks and learn their existing policies regarding ChexSystems. 

Winding Up

ChexSystems can be a lot more alarming than it seems to be because it challenges our financial identity right away with us being clueless and unaware. It keeps an eye on our banking behavior endlessly and surprises us with its sudden action, hence we have wrapped up all of the required facts you need to know about this. 

Around 80% of banks and financial institutions look up to ChexSystems for a reliable source of information, however, the remaining 20% are the safer option for you if you have been embargoed by ChexSystems.

There are some other banks too that do not rely upon ChexSystems, about which we will be talking about in our next article.

Hope to see you soon! 

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