Understanding ChexSystems Reports and Denied Accounts

Having an account denied due to a ChexSystems record can be confusing and concerning. But with some background knowledge on ChexSystems and how it works, you can better interpret your report and take steps to repair negative entries.

What is ChexSystems?

ChexSystems is a consumer reporting agency that provides banks and credit unions with background information on potential customers. Specifically, it offers records of mishandled checking and savings accounts.

Over 80% of banks and credit unions use ChexSystems to screen applicants for new accounts. They use the information to assess account opening risk.

Why Was My Account Denied?

If a bank denies your application due to ChexSystems, it means something in your report indicated you may not be responsible with that new account.

Here are some common reasons for denial:

• History of overdrawn accounts
• Unpaid account balances
• Suspected fraud on an account
• Outstanding checks or liabilities
• High number of recently opened accounts

These types of activity suggest you may overdraft, miss payments, or otherwise cost the bank money on the new account. As a result, they deny the application for risk of default.

Obtaining Your ChexSystems Report

To understand exactly why you were denied and begin improving your standing, obtain a copy of your ChexSystems report. Here’s how:

1. Request the Report

You are entitled to one free report per year. Contact ChexSystems and provide personal information like your name, address, Social Security number, and phone number.

2. Review the Details

It will outline all the accounts reported by financial institutions, along with reasons for closure and negative marks. Make sure all the personal details are correct.

3. Check the Inquiries

It lists every institution that has requested your report in the past two years. Be sure you recognize all the companies to ensure no fraudulent activity.

4. Confirm the Opt-Out Status

ChexSystems allows you to opt-out of prescreened offers for credit and insurance. Make sure this aligns with your preferences.

How to Remove Negative Items

If your ChexSystems report contains negative marks, here are ways to potentially remove them:

Pay Any Unpaid Balances

If a bank reports an unpaid balance, repaying it directly may lead them to retract the entry. Get documentation that it’s paid.

File a Dispute

If you disagree with something on your report, file a dispute with ChexSystems in writing. Provide evidence supporting your case.

Negotiate with the Bank

Contact the institution that reported you and see if they will retract it from ChexSystems if you repay balances or meet other conditions.

Wait Out Negative Marks

Most negative entries drop off your report after 5 years, though unpaid balances remain for 7 years. Keep accounts in good standing and the issues will eventually disappear.

Tips for a Positive ChexSystems Report

Going forward, use these tips to build an impeccable ChexSystems record:

• Never overdraft accounts. Sign up for overdraft protection or alerts.
• Avoid unpaid fees and balances by properly tracking account funds.
• Be cautious closing accounts with negative balances, as they may get reported.
• If switching banks, close accounts responsibly by paying fees, voiding checks, etc.
• Limit opening many new accounts in a short timeframe, as banks may see this as risky.
• Make payments on time and keep accounts in good standing.
• Check each annual ChexSystems report for any discrepancies and dispute immediately.

Getting a Bank Account with a Negative ChexSystems Record

If you need a checking or savings account but have a negative ChexSystems report, you still have options:

• Ask banks to reconsider: Submit denial letters or call banks to explain your circumstances and demonstrate responsibility.
• Try community banks and credit unions: Smaller institutions may be more flexible on approvals than large banks.
• Open a secured account: Some banks offer accounts where you pay a refundable security deposit to access services.
• Join a bank’s second chance program: Many institutions have special programs to help those repairing their banking histories.
• Consider prepaid debit cards and cash-based accounts: These let you access certain banking features without a credit check.
• Build your credit report: Having excellent marks on your credit reports can offset ChexSystems history.

The Bottom Line

Having a ChexSystems denial can be alarming but does not have to ruin your banking capabilities. Now that you understand ChexSystems reports and how to handle negative items, you can limit the impact on your finances. With a little time and diligent money management, you can rebuild your ChexSystems standing.