What is ChexSystems?

I’ve written about my experience with ChexSystems, but a lot of people don’t know what it is. After reading this post, I encourage everyone to head over and order your free (actually free) consumer report to make sure you’re in the clear.

Chex Systems is a network made up of financial institutions that contribute information on mishandled checking and savings account. 80% of all banks and credit unions in the US are members of ChexSystems. Not all banks do hard inquiries during the application process for a checking account, but almost all use ChexSystems. The members share information to help them asses the risk of opening new accounts.

How Does Someone get added to ChexSystems?

In most cases, people are added to ChexSystems when a bank closes an account for something other than a voluntary reason. This includes negative balance for an extended period of time, excessive overdrafts, outstanding balances, or fraudulent activity. Once an account is close, the account information, including the reason for closure, is reported to ChexSystems.

How Will Being in ChexSystems Affect Me?

There is some confusion about how being in ChexSystems could affect you. The first thing to know is that ChexSystems only provides information to the member institutions and does not decide whether or not to grant new accounts.

That being said, if you are in ChexSystems, there is probably a good reason for it. If you have have a delinquent banking history, you have less of a chance of getting a bank account with someone else. Many times, banks will only take on customers for checking accounts who have a good history with other banks.

What If I Was Added?

If you think you were mistakenly added to ChexSystems or if you see something on your report that you think is inaccurate, you can dispute the report either with ChexSystems or the bank that submitted the error.

While most banks use ChexSystems when determining whether or not to open an account, not all do. Another option is second chance banking account, which don’t use ChexSystems, but have other inconveniences. For example, BBVA (the people who are behind SmartyPig) has second chance checking account. The downside is that there is a $7.95 monthly fee!

Now that you know how important it is to stay out of ChexSystems, go request a free copy of your ChexSystems consumer report. This isn’t a credit report, but can be very useful if you want to check the health of your non-credit accounts. And remember, you can do so once every 12 months. What do you have to lose? Make sure you’re in good standing with the banks and you won’t have to worry!

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