ChexSystems Explained: How to Overcome Banking Hurdles


What is ChexSystems?

ChexSystems is a consumer reporting agency that helps banks decide whether to open a checking account for a new customer. They provide information for banks and credit unions much like the credit bureaus: Equifax, Experian, and TransUnion. However, there are some differences in the way they maintain and report data.

ChexSystems does not make any decisions regarding whether a bank account is opened for you. That choice depends solely on the financial institutions you decide to work with, but not all banks use ChexSystems.

As a consumer reporting agency, ChexSystems is governed by the Fair Credit Reporting Act (FCRA) and other laws enforced by the Federal Trade Commission.

This means you have access to your ChexSystems report in much the same manner as you can access the credit reports from the three major credit bureaus. If you’ve had problems opening a bank account, it may be wise for you to order your ChexSystems report to see what’s listed.

See also: Am I in ChexSystems? How to Tell if You Are in ChexSystems

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What You Need to Know Before Opening a Bank Account

If your checking account was closed for non-sufficient funds (NSF), excessive overdrafts (OD), fraud, or other reasons, it may be difficult to open another checking or savings account.

In particular, issues arise when your checking account is closed, and you have unpaid fees either for overdraft or other services. Most credit unions and banks will refuse to establish a bank account for individuals who have mismanaged deposit accounts in the past. This is true even if you currently have funds available to open an account.

Financial institutions rely on ChexSystems to provide information about people who have had issues with insufficient funds in the past.

It works much like being denied a credit card due to past credit history. Even if your current situation has improved, you may be denied a bank account based on your past banking history.

Check Out Our Top Picks for 2024:

Non-ChexSystems Banks
Second Chance Banks

How does ChexSystems work?

ChexSystems keeps track of bank accounts that have been closed for particular issues. More than 90% of banks and credit unions in the U.S. use ChexSystems as part of the application process for a new checking or savings account.

You can see why it can be difficult to successfully apply for checking and savings accounts if you’re in their system. The standard term for this is accounts that were closed “for cause.” The term “for cause” can encompass any number of things, including:

  1. Multiple bounced checks in a short amount of time.
  2. False information provided on a bank account.
  3. Nonpayment of insufficient funds or overdraft.
  4. Abuse of a savings account, debit card, or ATM transactions.
  5. Any type of fraud.
  6. Violation of any banking rules and regulations

This is by no means an exhaustive list. ChexSystems may include your closed account for another reason besides what is listed here. Each time you have a deposit account closed for one of the reasons listed above, ChexSystems keeps track of it in their database.

See also: 7 Reasons for Being Denied a Checking Account

How long does it take to get out of ChexSystems?

ChexSystems keeps the information on file for up to five years from the date the bank account was closed. This may seem similar to a credit score, but ChexSystems is an entirely different scoring process.

Your ChexSystems Consumer Score ranges between 100 and 899. The higher the score, the better. Interestingly, you can have a poor ChexSystems rating while having an excellent credit score, and vice versa.

They’re completely different measures of your financial history, with the information being used in very different situations.

See also: How Long Do You Stay in ChexSystems?

How long does ChexSystems stay on your record?

Even if you later pay off the overdraft you owe to the bank or credit union, it will remain on your ChexSystems record if the account was closed with unpaid negative balances.

While ChexSystems will update a paid overdraft, they will not remove the record from their system until after the five-year period. However, they will remove it if there is evidence the bank account was listed improperly. For example, if the account is not yours or was created fraudulently as a result of identity theft.

Most ChexSystems banks won’t open an account for you if you have one or more incidents listed on your ChexSystems report.

If you’re denied a bank account due to your ChexSystems report, you are entitled to a free report within 60 days of being denied. This is no different from being denied credit due to information on your credit report.

Check Out Our Free Guide:

How to Get Out of ChexSystems

How can I get my free ChexSystems report?

The best way to get your ChexSystems consumer disclosure report is to order it directly online from the ChexSystems website itself. You can also request a ChexSystems report by mail:

Chex Systems, Inc.
Attn: Consumer Relations
7805 Hudson Road Suite 100
Woodbury, MN 55125

You should receive your ChexSystems report in about five business days. If you find any inaccurate information, you can dispute it in the same way you can dispute credit report inaccuracies. You may also place a statement on your ChexSystems report for any negative information listed.

You can use this statement to explain any circumstances of why an account was closed, such as disputed fees or other issues.

Non-ChexSystems Banks

While most banks do use ChexSystems, it’s possible to find banks that don’t. Some banks don’t screen applicants at all for checking and savings accounts.

However, they may look at ChexSystems reports, so it’s important to understand what’s on there as well. They might also review any records you have in the Early Warning System (EWS) or Telecheck Data.

Here is a list of popular banks and credit unions that DO NOT use ChexSystems.

Second Chance Banking

Some banks and credit unions that use ChexSystems also offer “second chance checking” accounts to people with only one or two incidents on their ChexSystems report.

These banks may still use ChexSystems, but they are willing to offer you a second chance. You can expect these second chance checking accounts to limit how much money you can withdraw or have a minimum balance requirement.

You might also hear this type of account called a “fresh start” checking account. Eventually, if you handle your second chance account responsibly, you will be able to open a regular bank account.

To improve your chances of getting approved for either a second chance checking or non-ChexSystems account, consider forgoing the option of overdraft protection. Many people’s previous trouble is not paying their overdraft fees.

If you don’t get overdraft protection, the bank doesn’t risk losing money on your checking account. You’ll just need to be extra careful in tracking your spending so that your debit card isn’t denied at the register for insufficient funds.

ChexSystems Banks

Here is a list of popular banks and credit unions that DO use ChexSystems.

Setting Up Direct Deposit

If you have a steady income, you may be able to get a checking account at a bank or credit union if you are willing to sign up for direct deposit of your paycheck. By setting up direct deposit, the bank may be more willing to work with you, regardless of your past ChexSystems problems.

Before Opening a New Bank Account

If you know you have issues with your ChexSystems record, it’s in your best interests to find out the bank’s policies beforehand. This is because some banks will open an account for you and check your consumer reports after the account has been opened.

If issues are found, your account will be closed, and the bank will give your initial deposit back to you. Unfortunately, this means you may be without your initial deposit for some weeks, as the bank usually mails a check when they close an account and don’t issue a direct refund.

Prepaid Debit Cards & Other Options

If you can’t find an account that works for you, there are some other avenues you may be able to explore. For example, some companies offer prepaid debit cards, which allow you to load your funds onto the card and use it to make payments. Essentially, a prepaid debit card works like a checking account without the ability to write checks.

In some instances, they even have online bill pay to allow you to still meet your financial obligations without a checking account. However, it’s important to read the terms and conditions to ensure you aren’t being overcharged for using the card. Some of them can charge up to $1 or more per transaction.

Track It Like a Credit Report

Keeping track of your ChexSystems report should be a part of your overall credit maintenance. Similar to checking your credit report for errors from the three major credit bureaus, you should also regularly examine your ChexSystems report for any errors. This can save you a lot of hassle if you ever need to open new bank accounts in the future.

Bottom Line

ChexSystems does not directly recommend whether you can open a new checking account. However, the information provided by them can and will affect your ability to obtain checking and savings accounts in the future.

Your best option, if you’ve had a checking account closed due to nonsufficient funds in the past, is to be aware of the issue. Then, look for banks that will accept your hard-earned money despite your past problems.

Lauren Ward
Meet the author

Lauren is a personal finance writer who strives to equip readers with the knowledge to achieve their financial objectives. She has over a decade of experience and a Bachelor's degree in Japanese from Georgetown University.