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Blacklisted by ChexSystems? Here’s What to Know

Banking, Checking Accounts
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Blacklisted by ChexSystems? Here’s What to Do

When you apply for a bank account, most banks use an agency called ChexSystems to see whether you have mishandled any accounts in the past. A negative report can affect whether your application for a new account is accepted.

The review process is similar to what happens when you apply for a credit card. A card issuer generally goes through at least one major credit reporting bureau to look up your credit. This helps it determine if you’re a risky customer for a new credit card.

Similarly, when you apply for a bank account, the bank reviews ChexSystems to find any negative banking history you might have. (Some banks look at your credit score, too. Get your score free from NerdWallet.)

Here’s how it works and how you may be able to overcome any obstacles.

What is ChexSystems?

ChexSystems is a national consumer-reporting agency that keeps track of people who have mishandled a checking or savings account, by having a check bounce or failing to pay a fee, for example. Banks and credit unions share information about these individuals and whether the bank closed their accounts. In return, the agency collects these consumer histories and creates risk scores for banks to use as they consider potential customers.

About 80% of banks and credit unions use ChexSystems reports to help them decide to approve or deny bank account applicants, according to Credit Builders Alliance, a nonprofit group that helps low-income consumers build strong credit.

» MORE: 5 steps for getting your ChexSystems record clean

How ChexSystems works

ChexSystems provides the following to banks:

  • Risk scores: ChexSystems Consumer Scores are similar to FICO credit scores and range from 100 to 899. The higher your score, the better. You can request your score from the agency via mail or fax.
  • Reports: The reports show items such as unpaid fees (primarily from overdrafts), checks bounced at retailers and suspected fraud. Reports also list credit inquiries, check orders and consumer-initiated credit freezes. (If you have been a victim of identity theft, you can place a freeze on your ChexSystems consumer report. This means no new financial account can be approved unless you authorize it.)

You can get a free copy of your report once a year by visiting the official ChexSystems website. But you might not have one, and that’s a good thing: Unlike credit reports, these focus mostly on negative account history.

Are credit reports part of the review process?

Sometimes banks might want more information than just 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 an overdraft line of credit, for instance, it might request credit information. Banks can either pull a person’s credit report from one of the major credit reporting bureaus or get additional information that ChexSystems provides from third-party data.


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How long do items stay on a ChexSystems report?

Although federal regulations allow ChexSystems to keep records for up to seven years, the agency currently keeps them for only five years. The main exception is if a financial institution requests removal before that, for example, if it found an error as a result of a customer dispute. If you review your report and see any incorrect or out-of-date information, you can also dispute it with ChexSystems.

How do I get a bank account if I’ve been denied?

Getting 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. Although these typically come with monthly fees, customers often can move to less costly regular checking after successfully managing second chance checking for a year or two.

“It may be possible to open accounts in a credit union, as some do not subscribe to ChexSystems,” says Rob Drury, executive director of the Association of Christian Financial Advisors. “Also, bank or credit union managers often have the authority to grant account privileges in spite of negative ChexSystems reports.”

You also could opt for a prepaid debit card that has low fees and strong protections.

»MORE: NerdWallet’s best prepaid debit cards

Being denied a bank account because of a ChexSystems negative report or low score isn’t the end of the world. Understanding how the process works and what your current account options are can help you progress toward better money management.

Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd. NerdWallet writer Tony Armstrong contributed to this report.

This article was updated. It was originally published March 12, 2015.


Image via iStock.