What Is ChexSystems – Are You Blacklisted?

What Is ChexSystems – Are You Blacklisted?

ChexSystems is a reporting agency that reports to banks for potential risk to their institution. It gives detailed reports on consumer behavior regarding financial transactions. You can think of it as an institution like the credit reporting bureau. However, it is very different than that.

The decision to allow you a checking account rests on the report that ChexSystems give to banks and credit unions. This can be the deciding point of your account getting approved or denied. Therefore, it is extremely important to know about ChexSystems’ reporting. Knowing how and what can cause a report to go against your favor may make a huge difference.

What Is ChexSystems?

ChexSystems is essentially a reporting agency that is affiliated with the FNIS (Fidelity National Information Services) that provides extended technological support and banking software to financial institutions. They work under the FCRA (Fair credit reporting act) and their sole purpose is to track the checking and saving accounts.

ChexSystems reporting is different from that of other reporting agencies like the credit reporting bureau. Unlike other agencies, ChexSystems does not keep a track of your credit accounts; instead, they track your deposit accounts and maintain reports of all your account activity.

Whenever you will want to apply for a checking account, the banks will refer to your ChexSystems report before granting you your account. If they don’t allow you to open an account, it may be very likely that something negative has appeared in your ChexSystems report.

Do note that banks may also refer to other reporting agencies as well to get your reports.

How ChexSystems Reports Work

Many people will get confused between the credit report and the ChexSystems report. A credit report only has a history of debt handling by the consumer. Some of the examples that ChexSystems may report are but not limited to:

A closed account

Due to fraudulent activity, the account will be closed by the bank if it sees that the account has been misused or if the person holding the account is habitual of writing a bad check.

Bounced check

Everybody holding an account may have committed this mistake once in a while and one mistake is not a big problem. But if the report suggests a consistent behavior of checks being bounced then it can be reported.

Debit card abuse

This includes ATM abuse and other fraudulent activities like posting empty envelopes while depositing at the ATM.

Excessive stolen or lost reports

Understandably, credit cards can get stolen or lost sometimes. But an ongoing report of stolen cards is likely considered to be a fraud and will be reported.

Identity Theft

If the account has been used for a fraudulent and criminal activity then this will be a red flag.

Negative balance

Negative balance can accrue due to unpaid fees and other charges like fees accruing even after zeroing your account but not closing it. Not addressing this issue in a reasonable amount of time can get you reported as well.

All this information can stay on your report for over five years. Similar to the credit score, it also has a score range of 100 to 899. The lower the better.

Defining Account Abuse

So what exactly is abuse of accounts? Account abuse is characterized by such behavior that poses risk to financial institutions from consumers if they are allowed to open an account. This is a general definition which is not the official definition and is just an outlook of how things go in the real world. What constitutes an account abused is not clearly defined. ChexSystems has its own SOPs to gauge out negative behavior and do not disclose its methods of doing so.

This has driven many concerns that owing to lack of transparency and the way the whole financial system works; low-income individuals are likely to accrue negative balances in their account. For example, in the case of overdrawing, if the consumer cannot afford the fee, the account will accrue negative balance which can pile up. There have been voices to change the way banks and financial institutions screen their consumers.

Banks on the other hand argue that the consumers who accrue balance repeatedly have an unfair advantage from overdrawn accounts. They did reach an agreement in Newyork in 2015 but still, there are many challenges that the consumers face in having fair access to checking accounts. Keep in mind that banks are tracking your every move and what you choose to do with your account. Therefore, keep an eye out for negative balance to save yourself from major headaches in the future.

How Negative Balance Affects Your Reports

The most probable outcome that you are going to have after being reported through ChexSystems is that the bank is going to deny your account. In that case, you will have to do without a checking account and take actions that will make a good impression on your ChexSystems report. If you can show that you are more responsible, the next report may have a positive impact and your chances of getting a checking account may increase.

Keep in mind that different banks have different rules. While some may allow you to have an account with them despite having some negative points on your report, others may not allow that. For example, some banks may allow you an account if you provide proof against the point in concern.

There is good news for you. Some banks may allow you what they call a “second chance account” which is a checking account but it may have higher fees and lack some of the benefits and features of a normal checking account. What this does is that it balances the risk that a bank may suspect from a potential consumer.

Obtaining Your ChexSystems Report

So how do you start with all this? The first step is to get your ChexSystems report. You have the right to have your report once every 12 months or if a bank has denied you the account in the past two months. This right is given to you by the FCRA. You are entitled to the report if:

  • You have been denied an account
  • You have been a victim of identity theft or there has been fraudulent activity on your account
  • Your report is caused by bad data
  • Your report is caused by a fraud
  • You are unemployed and are likely to get employed within the next 30 days

You can directly request for a report by filling a request online at the ChexSystems. You should be able to get your detailed report after five business days.

How to Clear Up Issues

We advise you to be proactive if you have been reported. If you acknowledge a problem to be true, contact the bank and immediately make efforts to repair the problem. Ask and you will be given. Don’t shy away from going to the bank and talking directly just because you think you will be rejected. You never know that the bank may be willing to work with you only if you show them your intent to repair the problem. Smaller credit unions may be more open in sorting out issues with you.

If you can’t pay off all the money you owed, then you can always ask the bank to set up a payment plan for you to pay in installments. If you think that this was due to an error on your file, directly contact ChexSystems and file a dispute. Under FCRA, reporting agencies have to correct the information within 30 days if a consumer reports it as false.

When you have been denied an account, it will follow a period when you will have no checking account. We know it is quite difficult to get along without having access to a checking account. While you are at it, consider monitoring your money and paying your bills through credit cards or money orders. Once you have regained your reputation, you will be qualified for having a checking account soon.

How to Avoid Being Reported to ChexSystems

The only way to stop being reported by the ChexSystems is to manage your accounts with a sense of responsibility. Here are a few tips that you can do to prevent being reported.

  • Always balance your account and check it regularly. Always make a budget and stick to it. This will make you save more money and avoid overspending. Not monitoring the accounts is the major cause of over-drafting.
  • Always keep funds in your accounts till the checks are cleared. Avoid spending your balance too much. Bounced checks can be a major cause of your account being over-drafted. Give your checks about three to five days to clear.
  • Try all that you can to bring your account back into shape. Even if you don’t have the money to pay off all the balance, you can still work with the banks if you continue to be in constant connection with them.
  • Close your accounts properly. Just zeroing out your balance is not enough as an open account can still accrue fees that can pile up over time, thus negatively affecting your account. If there are any automatic payments, discontinue them. Keep a track of all the places you have used your account for automatic payments and cancel them when you close you want to close your account.

What Do I Do If I’ve Been Denied a Checking Account?

Consider Other Options

Life does not end if you have been denied a checking account. Stay calm and look for alternatives. It is not an issue if you have been denied a checking account as you can always go for other products like the second chance account. It may have a lot of fees, but it is a good start to regain your reputation.

These are low-risk accounts that lack some of the other features like the overspending protection or debit cards, but using these can help you start to build anew.

Dispute Errors

If you think that your account has been reported due to an error in the system, you can immediately file a dispute with both the bank and the ChexSystems and tell them that they provide information that was inaccurate. Keep in mind that before doing that, investigate and establish your claim thoroughly before filing a dispute.

Where to File a ChexSystems Dispute

You can file online dispute at chexsystems.com

You can also send your concern in writing at:

ChexSystems Inc.

Attn: Consumer Relations

7805 Hudson Road, Suite 100, Woodbury, MN 55125

Do I Need Overdraft Protection?

Overdraft protection is a good feature to have. While you can opt-out of it anytime, it is recommended to use it. While it may protect you from spending too much, it can also tempt you to spend more of the money that you don’t have, resulting in debt and additional fees. If you have run into financial troubles then you are better off without this feature.


Prepaid cards are a good alternative to checking accounts because they can receive both cash and check deposits. It is a low-risk account and therefore it comes with monthly fees. You can also have these fees waived if you have consistent deposits in your account.

Of course, if you are not interested in alternatives, and want to have a checking account then you can always try with other banks to see if they have different terms and conditions regarding your ChexSystems Report as different banks have different requirements.

What We Have Learned So Far

  • ChexSystems is a reporting agency that reports consumer behavior regarding their finance. This report allows the banks to assess the potential risk that some consumers may pose to their institution.
  • All negative activity can be reported by the banks to the ChexSystems.
  • Passing a threshold of negative activity can result in a denial of account.
  • The report can be improved over time.
  • You have the right to receive a copy of ChexReport of the last year and file a dispute.

Bottom Line

Inaccurate information can be provided by banks to the ChexSystems which can result in account denial. It is not something extraordinary and it happens all the time just like inaccurate credit reports. This is why you need to be constantly engaged with your bank and pull out your reports regularly. We have provided how and when you can have your ChexSystems report in case you are denied your account. Having a ChexSystems report allows you to revise any factual inaccuracies in the report as well as make improvements to your current account.

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