Everything You Need to Know About ChexSystems – MagnifyMoney
- December 17, 2019
Excerpt from the MagnifyMoney article, Everything You Need to Know About ChexSystems
Featuring Alexandra Cisneros, GreenPath education specialist
Most people know they have a credit score and credit report that lenders use to decide if and how you can borrow money. But did you know that banks and credit unions have their own method of determining if you’ll be a good customer? Enter ChexSystems, a reporting system that tracks all of your closed checking and savings accounts. Even though many consumers haven’t heard of the agency, its reports could have a massive effect on your ability to open a new bank account.
What is ChexSystems and what does it do?
The information that ChexSystems tracks is used to create your Fair and Accurate Credit Transaction Act (FACTA) report. Think of this as a banking-specific version of your credit report.
When you apply for a new checking account or savings account, the financial institution will often run your ChexSystems report to see if you have any negative marks. These can include overdrawn accounts, negative balances, closed accounts and more, all of which typically stay on your report for five years. Basically, banks check these reports to assess how much of a risk they’re taking by doing business with you.
“[Banks] want to know that if someone’s going to open an account with them that they’ll keep the account in good standing,” said Alexandra Cisneros, an education specialist at GreenPath Financial Wellness.
There are a few ways that ChexSystems helps banks do that. First, there’s your “risk score” — also known as your consumer score — that the agency calculates based on your prior credit behavior. Scores range from 100 to 899, and just like with your credit score, a higher number means you present a lower risk.
ChexSystems also generates a Consumer Disclosure report, which shows specific details about your credit history. The report might list past issues, such as unpaid account fees, overdrafts, bounced checks or even suspected fraud.
How many banks use ChexSystems?
Around 80% of all banks use ChexSystems, according to Banks.org. Cisneros said that nearly every major bank and credit union she has encountered does look at the agency’s reports, but there are some options in case you end up with negative marks or a low score.
Many banks offer “second chance” accounts, which specifically help people with less-than-perfect financial histories. These bank accounts might come with limitations or extra fees, but they can be a great workaround if you’ve received a poor ChexSystems report. Read on for more information on this option.
Continue to MagnifyMoney to learn more about ChexSystems, including what appears on the report and how to clean up mistakes and errors.
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