ChexSystems Knows All About Your Banking Business

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Many Americans possess an elementary understanding of both credit reports and credit scores and how each plays a significant role in a person's financial life. A bad credit report can prevent you from getting a job. A low credit score can drastically increase how much you'll pay for a loan or result in a rejection for a credit card. But fewer Americans understand the importance of another consumer reporting agency: ChexSystems.

ChexSystems operates as the credit bureau of the banking world. Your banking behavior is reported to the organization, which keeps a file on you and can send a report to a bank when you apply for an account.

So, if you left Bank A without repaying outstanding overdraft fees and attempted to open up an account with Bank B, the latter would see your negligence reflected on your ChexSystems report and likely reject you.

Some banks -– like Capital One (COF) –- are moving away from focusing on ChexSytems to determine whether or not to approve a new customer with a history of bounced checks or overdrafts. So one derogatory mark on a report may no longer prevent you from opening a new checking or savings account.

When Do You Get a ChexSystems Report?

Like a credit report, you're entitled to a free report once a year. You can proactively check your report or, in the more likely case, only pull one when you've been rejected for a bank account.

A few months ago, I attempted to open a savings account with Ally Bank (ALLY). Instead of being approved online, I received a message that the bank was unable to verify my identity and I needed to wait for a letter in the mail or a phone call for instructions. A week letter, the letter came in the mail: REJECTED.

Completely confused, I read the instructions in the letter, which recommended I request a free copy of my ChexSystems report and then call Ally with any questions.

What's in a ChexSystems Report?

Five business days later, my ChexSystems report came in the mail. Unlike credit reports, the ChexSystems report only reflects bank-related information, typically within the last five years.

The report is broken down into these categories:
  • Reported information.
  • Inquiries initiated by consumer action.
  • Inquires not initiated by consumer action.
  • Retail information.
  • History of checks ordered.
My entire report was blank. I've had my bank account for well over five years, but it doesn't exist on my ChexSystems report. Oddly, my Ally Bank application was not reported under "inquiries initiated by consumer action."

According to an Ally Bank customer service representative, my application was likely denied because my home address does not match the address on my driver's license. My desire to go avoid the DMV overpowered my desire for Ally's 0.95 percent interest rate on savings account. To resolve the situation, I've been advised by others who faced a similar issue to apply by calling instead of just going online. Or just apply to a different bank.

How Banks Report to ChexSystems

Unfortunately, there is no uniformed approach for banks to report information to ChexSystems. Banks can have different thresholds for what triggers reporting a negative account. Bank A may report a closed account with a -$34 balance that came as a result of an overdraft fee, while Bank B may not report until an individual is -$375.

Unlike with credit reports, the banks have complete control over when and what gets reported to ChexSystems.

Getting a Report and Disputing Incorrect Information

If you're rejected for an account like I was, you're entitled to a free ChexSystems report.

You can apply for a report by going to and completing a form, which will ask if you've been denied for a bank account in the past 60 days and to confirm your identity with a Social Security and driver's license numbers. The report will be mailed to you, typically within seven business days.

If your report displays any inaccurate information, you can dispute it in writing and send your statement to Chex Systems Inc. at 7805 Hudson Road, Suite 100, Woodbury, MN 55125 or via fax at (602) 659-2197. The ChexSystems customer relations department will respond within 30 days.

If all else fails, contact the Consumer Financial Protection Bureau to get your banking complaints resolved.

Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She's also the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. She is also the brand and content manager of MagnifyMoney.
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