When you apply to a US bank, they may use a company called ChexSystems. It shows if you have mishandled your accounts in the past, and has data that banks and other companies may use as signals for future behavior. Just like how a credit card company may use a credit scoring company, banks use a system like ChexSystems to check your history. They are not only looking for negative banking history, they may also look for behavior that may make you eligible for their preferential accounts.
If you have been blacklisted, or have a bad standing with ChexSystems, then you may have trouble getting a bank account in the future, especially if you want a free one or an account with certain functions.
Banks And Financial Institutions Share Information
ChexSystems was built to deal with banks, but they do share information with other financial institutions. Historic information is stored about you and your banking behavior, and then banks and other financial institutions use that information. They create their own risk scores based on what they think is important.
Between 50% and 80% of banks and credit unions use ChexSystems in some way or another, even if it is just used for due diligence checks to check their conclusions about you. This means that some banks and credit unions may use ChexSystems as their primary information-getting tool, and some may use it to double-check the information they got from other sources.
Where To Start And What To Do
Good financial habits are going to help you avoid problems with ChexSystems. Being aware of how much you have and how much you have to pay out is key. Why not check your bank balance daily online? You may be able to look at your pending transactions for an update on what will and won’t be drawn from your account in the coming days.
If you know you have blemishes on your record/report because you were a bit naughty with your accounts in the past, then try for easier-to-get accounts first. These are starter accounts, and accounts that do not offer a line of credit. If getting your account also relies on your credit report, then you are giving the bank more reason to deny you an account.
Take a proactive approach and call ChexSystems and your bank immediately to find out what it was that had your name added to the ChexSystems report. If something needs to be paid or is outstanding, you should resolve it right away. If there is a mistake, such as a creditor claiming you haven’t paid when you have, then have it cleared up with the company and call ChexSystems to have your report amended.
1. Rectify As Soon As Possible
If you have a debt with a bank, and are now finding it difficult to get another bank account. All you have to do is rectify the problem with your old bank. Pay them off, and contact ChexSystems to ensure your report has been amended to show that you paid off the debt. After the debt is paid off, you should be able to get a new account and a different bank.
The blemish will remain on your XXXXX report for five years, but it shouldn’t stop you from getting another bank account unless your report shows a flagrant abuse of your bank accounts.
Ask your previous bank or creditor if they would be willing to remove the blemish from your ChexSystems profile. Ask if there is anything you can do or any process by which you may convince them to remove the blemish from your ChexSystems profile.
2. What If You Cannot Have A Blemish Removed?
Let’s say there is a blemish or two on your account and it means you cannot get a bank account. You can wait for five years for all your blemishes to be removed, or you can wait a year or two before trying the banks again.
While you are waiting a year or two, you can try a second-chance bank or credit union. They give you an account despite your poor financial history. The only problem is that they usually charge fees, or they impose restrictions and/or offer less preferable account options.
Before you try a second-chance bank or credit union, look up credit unions that do not use ChexSystems. There are a few that use different systems, and there are some that use ChexSystems, but that pay attention to other factors that may override their decision to deny.
There are also some bank managers and account managers that will grant you an account despite your poor ChexSystems report. If you are denied, then ask if you could speak to a person that has the ability to grand account privileges despite a negative ChexSystems report.
3. What Does Your ChexSystems Report Tell Banks And Companies?
They have a report and a risk score that comes attached as part of the report. Risk reports are very similar to credit scores. A poor credit score will lower your chances of getting credit in the same way that a poor risk score will lower your chances of getting a bank account.
Your report will also show your blemishes such as bounced checks, signs of fraud, and other such actions that make you a less appealing bank customer. If you think your account has fraudulent activity on it, then contact your bank and put a freeze on your account so that any future transactions are authorized by you. Contact the police if you find evidence of fraud, and you should be able to have your ChexSystems report amended once the police investigation is over.
4. Get A Free Copy Of Your ChexSystems Report
As a credit scoring company, which is technically what ChexSystems is, you are legally entitled to your ChexSystems report once a year for free. You are also entitled to it if you were just denied an account because of your report.
Contact them via their website and/or over the phone and get your free report to see how good or bad your report is. Remember that your blemishes will disappear after five years, so you may not have to play the waiting game for too long. For example, if you bounced six or seven checks around 4.5 years ago, simply wait over six months and apply for bank account again.
Look for things in your report that you feel are a little unfair, or that do not belong there. You may file for a dispute if you think there is a chance you may get the blemish removed.
Do not pay to have blemishes removed. There are many companies that claim they can clean up your ChexSystems report if you pay them, but you should not. All they will do is file a dispute in your name, and you can file one in your own name for free.
5. What About A Pre-Paid Debit Card?
There are plenty of companies that allow you to have and use pre-paid debit cards. They are an option if you are unable to get a bank account. These are often accounts that you may have for free. If you try to overdraw or spend too much, then it will simply deny the transaction. The card only works for purchases and such if you have money in your account.
6. Can You Get A Guarantor?
If you are having trouble getting a bank account, is there anybody you know that will be your guarantor. They are responsible if you misbehave on your account. You will have to find an absolute idiot to be your guarantor because they will be responsible if you start misbehaving. Nevertheless, a guarantor or a joint account holder is one way of getting a bank account if you have been blacklisted by credit scoring companies.
7. The Legal Route
The following should not be considered financial or legal advice. It is simply an opinion presented as an option.
Some banks may be trying to weed out their bottom tier of customers by using ChexSystems as a way of eliminating people that will not keep much money in their accounts. To open an account, it costs a bank around $200. To weed out their poorer customers, they may use ChexSystems as an excuse to deny you an account. If you think this sort of thing has happened to you, then contact The Federal Reserve government departments, as they will now accept your bank complaint. Tell them why you think a bank was wrong to deny you an account, and mention that you think it is unfair that ChexSystems is being used in this way. Complaint Form Here.
Take a screenshot of your complaint and email it on to your bank, while asking for another chance to apply for an account for just a savings-only account. Ask for an account that doesn’t include paper-checking privileges. Look up a few legal cases where other people have sued a bank and won, and reference them when you email your bank asking for a second chance. There are laws that help you deal with your bank if you feel they have treated you unfairly, and very few people know about them. It may be worth your while doing a little research to see if you can wield the law as a weapon to help you bully the bank into giving you an account.