If you’ve ever had difficulty opening a checking account, then you may be all too aware of a company called ChexSystems. But how much do you really know about this company that happens to be scoring your banking behavior?
Just as consumers have credit scores that are an important factor in whether or not they will be approved for credit, consumers also have what we’ll call a “debit score” which helps determine whether or not they will be approved for a checking account. Want to learn more? Read on to learn nine things you need to know about ChexSystems, the keeper of your debit score.
9 Things You Need to Know About ChexSystems
1. ChexSystems Is Governed by the Fair Credit Reporting Act
Founded in 1971 and based in Minnesota, ChexSystems is a consumer reporting agency that tracks banking behaviors that help banks understand if a potential new customer poses a risk to them in the form of overdrawn accounts and other “account mishandling.” A subsidiary of Fidelity National Information Services, ChexSystems is a private company.
Your first thought about this company might be, “who has the right to go around scoring my banking behavior? Aren’t credit scores enough?” The truth is, financial institutions may evaluate risk with consumers in any way they can, and they can lose money to a consumer via debit accounts just as easily as they can via credit accounts.
That’s why bank accounts that have been overdrawn too many times or have too many instances of bounced checks can be closed by the bank. That’s also why it’s not always easy to get a new bank account if past accounts have been closed for such reasons.
The Fair Credit Reporting Act (FCRA), “promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.” The creation of this act takes no issue with the fact that consumer behaviors are measured and reported, but it does mandate that the reporting be done in a way that protects the consumer.
ChexSystems, which says it, “provides services to financial institutions and other types of companies that have a permissible purpose under the FCRA,” is governed by the FCRA. Thus, it’s required to maintain the accuracy of the information reported, and to protect your privacy as set forth in the FCRA.
2. ChexSystems Generates a Consumer Disclosure Report
As you might have already surmised from the information above, ChexSystems collects information given by financial institutions relating to your banking behavior and generates a report of that information.
This report looks similar to a credit report. The report will consist of personal information such as your name, address, and birthdate. From there, the report will include any reported instance of a bank account closure due to things such as “account abuse,” fraud, insufficient funds, and the like. The report will also list any reported instances of returned checks, check cashing inquiries, and more.
You can see a sample ChexSystems consumer disclosure report here.
3. You Have the Right to View Your Consumer Disclosure Report
If someone’s going to make a report on you, you should be able to see it, right? Well, just the way you have the right to request and view your credit report, you also have a right to request and view your ChexSystems consumer disclosure report.
Simply follow this link to learn how to request your report, which you can do for free once per year, via phone, mail, fax, or the web.
4. Negative Items on Your Report May Stay for Five Years
ChexSystems reports generally report on the negative items. If you’ve never had an account closed by a bank for example, or a bounced check or other similar types of account problems, then there’s most likely nothing really to report. However, if a bank has closed your account because of your account activity, then the bank can report that information to ChexSystems.
Once a negative item is reported to ChexSystems, the company can maintain a report of that item for five years. Banks may use this information to decide whether or not to grant you a checking or savings account.
According to ChexSystems, the only way negative items will be removed early is if, “the source of the information requests its removal or ChexSystems becomes obligated to remove it under applicable law or policy.”
So, when would something like that happen? Keep reading.
5. It’s Possible to Dispute Your ChexSystems Consumer Disclosure Report
It might feel as though you have no say in what your report says about you, but that’s not entirely true. Although ChexSystems lists information about you given by financial institutions, you can have a voice on your report as well.
This is another thing ChexSystems reports have in common with credit reports: You can dispute inaccurate information on your ChexSystems consumer disclosure report.
If you reviewed your ChexSystems report only to find that a financial institution gave inaccurate data about you or your history with them, you can dispute it with the financial institution or take it up with ChexSystems. Submitting a dispute via ChexSystems means they’ll start an investigation into the matter.
Like credit reports, ChexSystems dispute investigations can take 30 days (or 21 if you live in Maine). This time can potentially be increased by up to 15 days if you give more information or documentation during the investigation. Once the investigation is complete, ChexSystems will mail you the results.
You can submit a dispute on your ChexSystems report here.
6. You Can Add a Statement to Your ChexSystems File
If, after an investigation, you are concerned that inaccuracies are still on your report, you can add a statement to your ChexSystems consumer disclosure report. The statement must be 100 words or less (200 in Maine), it can’t include people’s or business’s names, it has to relate to the information on your report, and it can’t have profanity in it.
Finally, if you opt to include personal information, you should be aware of the fact that any business requesting to view your ChexSystems report will be able to see that information — nothing will be redacted.
Here is a form you can print to request to add a personal statement, and you can mail it to ChexSystems, Inc., Attn: Consumer Relations, 7805 Hudson Road, Suite 100, Woodbury, MN 55125 or fax it to (602) 659-2197.
7. There Are ChexSystems Scores As Well As Reports
Think you’re finished once you’ve viewed your ChexSystems report? Think again. ChexSystems also develops ChexSystems scores.
A ChexSystems Consumer Score is not the same as credit scores generated by FICO® and VantageScore®. Like the ChexSystems consumer disclosure report, the ChexSystems Consumer Score is based on your banking behavior as reported to ChexSystems. The range of this score is 100 to 899, and the higher your score, the less of a risk you’ll probably seem to financial institutions viewing your score.
Want to see your ChexSystems Consumer Score? You can. Just print this score order form and mail it to the same address and fax number listed above, which you can also see here. Your score will then be mailed to you within 15 business days.
8. You Can Freeze Your ChexSystems Report
The similarities between the ChexSystems consumer disclosure report and credit reports keep on coming. This one is about the fact that you can request to freeze your ChexSystems report.
One reason you may decide to freeze your report would be to prevent the report reflecting accounts opened in your name by someone else. This could be something to think about if you have reason to believe that your identity has been compromised. Like a credit report freeze, you can lift the freeze if you so choose at a later date.
Click here to put a freeze your ChexSystems file.
9. ChexSystems Isn’t the Only Company Reporting Your Debit Behavior
Feel like you have a solid understanding of ChexSystems? There’s more. ChexSystems isn’t the only company reporting your banking behavior.
There are three different credit reporting bureaus and two major credit scoring companies, so it should come as no surprise that there’s more than one consumer reporting company pertaining to debit accounts. Besides ChexSystems, there’s also a company called Early Warning Systems.
Early Warning Systems works similarly to ChexSystems in that they have to comply with the FCRA, you have a right to review your report, and you have a right to dispute inaccuracies on your report. Learn more about how to view your Early Warning Services report here.
There’s another company that has a report on you called TeleCheck. Although TeleCheck’s primary purpose is to approve or deny a check transaction, the information it uses to do so is based on your previous check transactions that have gone through its system. Since TeleCheck boasts more than 374,000 merchants as clients, there’s a decent chance that the company may have information on some of your previous check transactions.
Why You Shouldn’t Ignore Your ChexSystems Report
One important way to empower yourself financially is to exercise your right to view consumer reports being generated on you, whether they be debit or credit reports.
But sometimes it might seem easier to ignore such reports, so we don’t have to deal with any information on them that’s less than perfect. Remember this: Ignoring your ChexSystems report, just like ignoring your credit reports, can potentially cost you money.
Bank accounts seem like a right we all have, but the reality is that for many, they can be hard to get. Those who don’t get approved for bank accounts can miss out on conveniences such as direct deposit and free ATM access, but that’s not all. Not having a bank account can also mean not having the ability to safely store your money, not getting a free debit card to use for purchases, or even being forced to pay high fees for sending and cashing checks.
If there’s any chance that something on your ChexSystems report is standing between you and a good bank account, you should consider trying to resolve it. View your report, dispute inaccuracies if they exist, and prevent things such as insufficient funds and bounced checks from hurting your chances of maintaining a bank account.
[Learn how to keep your debt from negatively impacting your credit – read this.]