On the ChexSystems blacklist? What there is to know

Key points to remember:

  • ChexSystems is a reporting agency that banks use to track customers who have mismanaged their bank account, including not paying overdraft fees or bouncing a check.

  • ChexSystems registrations typically follow people for up to five years.

  • Even if a person has a ChexSystems registration, they can usually still open a second chance checking account, which is an option for people who otherwise cannot get a bank account.

If you have been denied a bank account, it may be due to a report on ChexSystems. When you apply for a new account, many banks use ChexSystems to see if you have a history of poor bank account management. This may impact their decision to approve an account for you.

Being in ChexSystems can be difficult for a while, but there are still ways to get a bank account while you wait for your file to clear up. Read on for more information about ChexSystems and the options available.

What is ChexSystems?

ChexSystems is a national consumer information agency that tracks people who have abused a checking or savings account; for example, bouncing a check or not paying a fee. Banks and credit unions can use ChexSystems to determine if a person is a desirable prospect.

How does ChexSystems work?

A bank or credit union will review a candidate’s ChexSystems report. More than 80% of banks and credit unions use consumer reports from agencies such as ChexSystems or Early Warning Services to help them decide whether or not to approve applicants for a bank account, according to the National Consumer Law Center.

The review process is like applying for a credit card. A card issuer usually goes through at least one major credit bureau to check your credit. This helps the issuer determine if you are an at-risk customer for a new credit card. (Some banks also look at your credit score when you apply for a bank account. Get your score for free by NerdWallet.)

Banks and credit unions share information about these people and indicate whether the institution has closed their accounts. In return, the agency collects these consumer histories and creates risk scores and reports that banks can use when considering potential clients.

Next: Second Chance Check

Need a fresh start with your banking operations? Take a look at second chance US chequing accounts

ChexSystems provides the following information to banks and credit unions:

  • Risk score: ChexSystems consumer scores range from 100 to 899. The higher your score, the better, because high scores show that you are a less risky customer.

  • Report: The report – or “Consumer Disclosure,” as ChexSystems calls it – shows things like unpaid fees (mostly overdrafts), bounced checks at retailers and suspicions of fraud. The reports also list credit inquiries, check orders and security freezes initiated by consumers. (If you have been the victim of identity theft, you can freeze your ChexSystems consumption report. This is to ensure that no new financial accounts will be opened in your name without your permission.)

Individuals can request their own score and report. You can request both your score and your report from the agency, but a ChexSystems report is more helpful. This gives you some context on why a bank might have rejected you and you can get a free copy every year. To request the report online, complete this consumer disclosure form on the official website of ChexSystem.

You will usually receive the report by mail within five business days. But there may not be much in your report, and that’s a good thing: unlike credit reports, those from ChexSystems mostly focus on negative account history.

How long do you stay on ChexSystems?

Usually five years. Although federal regulations allow ChexSystems to keep records for up to seven years, the agency keeps them for five years.

Are credit reports part of the review process?

Sometimes a bank will require a credit report. Banks may want more information than banking history before approving a new customer’s account, including credit reports.

If a bank offers a checking account with a credit option such as a overdraft line of credit, for example, it may request credit information. Banks can either pull a person’s credit report from one of the major credit bureaus or get additional information provided by ChexSystems.

Can I get a bank account if I have been refused?

The short answer is, yes, you can get a bank account even if you are on ChexSystems. Being blacklisted doesn’t necessarily mean you won’t have access to a checking or other account for the next five years.

Some banks and credit unions offer people with blemished histories so-called second chance checking accounts. While these usually come with a monthly fee, customers can often switch to less expensive regular checking accounts after successfully handling the second chance check for a year or two.

“Bank or credit union managers often have the power to grant account privileges despite negative reports from ChexSystems,” says Rob Drury, executive director of the Association of Christian Financial Advisors. Also, you can try opening an account at a credit union, he says: “Some people are not ChexSystems subscribers.”

Here are several second chance accounts available nationwide:

NerdWallet Rating

Read the review

  • Monthly fee: $ 8.95 (unless waived).

  • A special function: Advance direct deposit up to 2 days.

NerdWallet Rating

at Varo, deposits are insured by the FDIC

  • A special function: 55,000 free ATMs.

Essential check

NerdWallet Rating

Read the review

Essential Radius Check

  • A special function: Possibility to switch to rewards verification in one year.

Consider other alternatives. You can also opt for a prepaid debit card which has low costs and strong protections.

Being denied a bank account because of a negative ChexSystems report or a low consumer score isn’t the end of the world. Understanding how the process works and your current account options can help you move forward towards better managing your money.

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