You’ve probably heard of Experian, Equifax and TransUnion, right?  But have you heard of ChexSystems?  Chances are, you haven’t.  Whether or not you’ve ever heard of ChexSystems, if you have applied for a checking or savings account, ChexSystems has probably heard of you.  These days, most consumers are well aware of the three major credit reporting agencies (credit bureaus)–Experian, Equifax (or CSC) and TransUnion–because of the effect these credit bureaus have on almost all facets of everyday life.  However, ChexSystems affects almost as many consumers and remains relatively unknown.

 What Is ChexSystems?

Like credit reporting agencies, ChexSystems is an information database company that collects, packages and sells information.  Unlike the credit reporting agencies, ChexSystems reports debit information and not credit information.  Where Experian, Equifax and TransUnion are credit bureaus, ChexSystems is a debit bureau.  For a fee, banks and retailers can access and use this information to make decisions about new bank accounts and the acceptance of checks.  ChexSystems also tracks the opening and closing of bank accounts, check order history, check writing history, history of collection activity on unpaid accounts, frequency of debit card and ATM use, and household demographics.  It is estimated that eighty percent of all commercial banks and credit unions in the United States use ChexSystems as a step in the consumer checking or savings account application process.

How Does ChexSystems Work?

When you present a check to a retailer that uses ChexSystems, your account is identified by a code that is entered into a computer or, in the case of a debit card, by swiping your card.  The resulting information will let the merchant know whether or not monies are available.  This valuable service can potentially save merchants a lot of money.   However, if your ChexSystems file contains inaccurate or outdated information, it can affect your ability to open certain bank accounts with most banks.  Since the same laws that govern the credit bureaus also affect debit bureaus, you can request a copy of your debit bureau report to see if any adverse information played a part in your being denied certain bank services.

The Importance of a Good Debit Report

It’s important to know that, in this day and age, having a checking account is an integral part of purchasing things on credit.  Creditors want to know how you’re going to repay a loan.  This is especially true when purchasing big ticket items like homes and automobiles.  If your goal includes purchasing a big ticket item, make sure that you’re prepared to do so with a good checking account and good debit report history.

There are banks that don’t use ChexSystems to check a potential customer’s debit report.  These banks are typically referred to as “Second Chance Checking” banks and can be found by doing an Internet search.  If you’d prefer to do business with a bank that utilizes ChexSystems, National Credit Solutions also works on our clients’ ChexSystems files.

We hope this information helps.  If you have any questions at all relating to ChexSystems or your credit, please call, email or reply here.

Thanks,

Brad Boruk
The Credit Guy
FCRA Certified Credit Strategist
214 504-7101

I write a lot in this blog about credit reports and credit cards, but I haven’t written about something that’s just as important as a clean credit report before—a clean ChexSystems report.  ChexSystems is a consumer reporting agency, just like the credit bureaus, that tracks your deposit accounts, like checking and savings, with banks.  A ChexSystems report is to your checking history as a credit report is to your credit history.  They track all negative deposit account activity such as overdrafts, negative balances, and fraud for the past 5 years, as well as mundane activities like account freezes, checks that haven’t been cashed, and check orders.  So just like a bank will pull a credit report to see how you have done in the past managing other loans, they’ll pull your ChexSystems report before allowing you to open a checking account to make sure you don’t have a history of writing bad checks or committing fraud.  Banks take negative ChexSystems reports extremely seriously and will typically reject an applicant if they have even one negative mark on their report.  This creates a snowball effect—no checking account means you won’t be able to open most credit accounts, secure an auto loan, qualify for a mortgage, etc.

The good news is ChexSystems is regulated by the FCRA, the Fair Credit Reporting Act, just like the credit bureaus are.  That means a bad ChexSystems report can be fixed.  ChexSystems allows a consumer to get a free report from them annually or after a consumer has been denied an account.  If you’d like to get a copy of yours, you can click here to order one directly from ChexSystems.  Just like a credit report, if you find items on your report that are inaccurate you can request that they be investigated.

Feel free to give us a call if you need help getting your ChexSystems file straightened out, we have extensive experience with them just like we do with the credit bureaus.  We can also put you in contact with several banks that we have relationships if you’re having trouble getting an account.