What is Chexsystems and how do I know if I’m in it?

If you have recently experienced a jaw-dropping denial of a checking account by a bank that you held in high regards, ChexSystems may be your problem. The bank may have given you the cold shoulder and denied you that account because of something that they saw when they ran a report on you. A majority of big players in the financial industry use a check system that tells them a lot of information about the way you handled past bank accounts. Here's how you can deal with the approval killer called ChexSystems.

What Is ChexSystems?

The brief and uncomplicated definition of ChexSystems is "consumer reporting agency." You're probably familiar with the credit bureaus and how they report your payment history and so forth. Well, ChexSystems is a credit bureau for the financial industry. When consumers mishandle their bank accounts, the banks report that mishandling to ChexSystems. ChexSystems then keeps the information in its database until it either expires or is resolved.

Certain banks connect themselves to the ChexSystems database and access it before they make decisions about approving bank accounts. ChexSystems does not have the right to tell the banks that they must deny a consumer a bank account, but oftentimes, the banks judge the consumers based on the information in the report anyway. Banks that don't use ChexSystems often will approve accounts as long as the consumer has identification and a significant amount of cash to store.

Bank account mismanagement can come in many forms and thus cause you to be listed in ChexSystems for how long. One bonafide way to get on the ChexSystems victims list is to allow your bank account to close permanently with a negative balance. Over drafting or pulling money off of an ATM card when you do not have it in the account is another way that you could end up in the ChexSystems hall of fame.

Many banks do allow their customers to overdraft (for a fee) as a courtesy or as a feature of their specific debit cards. However, if those actions become excessive, or if you do not pay the overdraft fee and bring your account current, you may end up on that list. Some other actions or lack of actions that can cause you to end up in the system are actions such as:

  • Check bouncing
  • Check floating
  • Check kiting
  • Opening the account with false information

Most of those processes are easy to understand and avoid. Check kiting is a complex process that you would surely know if you were doing it. It's best to avoid all of the above-stated situations like the plague so that your reputation stays either golden or silent on ChexSystems.

How Do I Know If I'm in ChexSystems?

You may be wondering how to find out if you are in ChexSystems. Perhaps you did have a recent overdraft or a banking discrepancy, and you are wondering what to do about it. If you're trying to open a different bank account, the banks will surely let you know if you are in the system. If you just want to find out to ease your mind, there is something you can do.

You can go to the source itself and take some steps to get the information. You're entitled to at least one ChexSystems report every year. Additionally, you're entitled to a report if a bank has refused you an account within the past 60 days. You can ask the company to send you a detailed report, and that will let you know if you are in the system or not.

If you do have items on the report, it will show you the name of the institution, the incident date, and the leftover balance if there is one. You can choose to handle the items on the report in a variety of ways. Obviously, the most effective way to handle a negative item is to contact the facility and try to pay the debt. You may have to get in touch with a third-party collection agency if the original institution sold the debt to someone else or referred it to someone else for collections.

If there is no balance involved, there may not be much that you can do about the negative record other than trying to find a second-chance institution or waiting for your information to fall off the records. Hiring any attorney may work if you have the funds to do so.

If you believe that you have showed up on ChexSystems in error, you can go through a dispute process. By law, they have to remove discrepancies and information that is not true. They have to conduct an investigation just like any other credit bureau would have to conduct such an investigation. If you are not on the list when you check the report, then you will receive a blank report in the mail, and that blank report will ease your mind about things. You can go on with everyday life knowing that you are not on the hit list in that case.

How to Check ChexSystems

So now you may want to know how to check if you are blacklisted. One of the easiest ways to get some help and some information from ChexSystems is to contact ChexSystems customer service. The number to the customer service department is 800-428-9623. You can listen to general information about the system, or you can order your report from it. You can visit the ChexSystems website and conduct some tasks if you think that someone has been using your information fraudulently, or if you want to initiate dispute requests. The site has a very user-friendly dispute process that you can delve into if you need to. Other things that you can do on the website are check your consumer score, put a security freeze on your information, or educate yourself further about your rights and various processes.

How Long Does It Take to Get Out of ChexSystems?

The last thing that you may ask if you are in the ChexSystems database is "How long do you stay in ChexSystems?" The question, "How long are you in ChexSystems?" can have a number of answers, and they all depend on how you handle yourself after you find out that you are in the system. ChexSystems normally keeps information in their records for up to five years. Thus, if you do nothing, you could end up in the system for the fullness of five years. If you make a good-faith effort to resolve the issues that exist, then you, may be looking at a shorter period of being marked as someone who may mismanage accounts.

If you have an outstanding debt, and you pay the debt, ChexSystems may remove the negative report within 30 days of the receipt of your payment. Such is not always the case, though. You may remain in the system for the fulness of five years, but the account may be notated as paid. The bank may then consider the fact that you paid the debt in their decision-making process. It's possible that you will still have trouble getting an account even if you pay the debt, but at least you will know that you did take care of it.

Now you have some knowledge about ChexSystems, how you can get on it and how you can stay off it. The best way to avoid getting on it is to stay on top of your accounts and always leave a little bit of extra money in them for "accidentals." Take care of problems immediately and proactively check your profiles.

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About the Author Patrick Mullins

Just out of college and ready to move off-campus, Patrick learned he had been a victim of identity theft when he was rejected by the landlord for having bad credit. After years of having multiple credit applications denied and fed up with having to pay security deposits up front to utility companies, Patrick decided to dispute Chexsystems and recover his credit. He educated himself on personal finance for years and, after successfully building up his credit record to a good score, he was approved for a mortgage and was finally able to buy a house in New York, where he now lives with his girlfriend and their dog, Winston.

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