What Is ChexSystems and What Is It Used For?

If you've ever been denied a bank account, ChexSystems is likely the reason.

ChexSystems is effectively a consumer reporting agency that tracks how individuals manage their bank accounts, and it plays a surprisingly large role in whether banks and credit unions will open a new account for you.

In this post, we'll break down exactly what ChexSystems is, what it tracks, how it's used, and what you can do if it's working against you.

What is ChexSystems?

ChexSystems is a consumer reporting agency that specializes in banking history, not credit history.

While credit bureaus like Equifax, Experian, and TransUnion track your borrowing and repayment behavior, ChexSystems focuses specifically on how you've handled deposit accounts like checking and savings accounts.

Every individual who has ever had negative activity on a bank account, be it unpaid overdrafts, returned checks, or suspected fraud, may have a record in the ChexSystems database.

When you apply for a new checking or savings account, the bank will generally submit an inquiry to ChexSystems to review your banking history before approving you.

This means that if you have a negative record, lots of banks will decline your application outright, even if your credit score is perfectly healthy.

What does ChexSystems track?

ChexSystems mainly tracks negative banking activity reported by financial institutions where you previously held accounts, including unpaid overdrafts, involuntary account closures, returned checks, suspected fraud, and unauthorized account activity.

The records that appear are generally kept on file for up to five years before they age off.

How is ChexSystems used?

ChexSystems is primarily used by banks and credit unions to screen applicants before opening new deposit accounts. Unlike a credit check, a ChexSystems inquiry is typically a soft pull, which means it generally does not affect your credit score.

Luckily, not every bank uses ChexSystems, and some institutions specifically cater to customers with negative banking histories, so being flagged in ChexSystems is not a permanent dead end.

What is a ChexSystems score?

In addition to your report, ChexSystems also generates a consumer score that ranges from 100 to 899. Your ChexSystems score paints a picture to deposit-taking institutions of how reliably you manage bank accounts, while your credit score paints a picture of how reliably you manage debt.

How to get your ChexSystems report

Every individual who has a ChexSystems record is entitled to one free copy of their report per year under the Fair Credit Reporting Act (FCRA).

You can request your free report directly from ChexSystems at chexsystems.com. Reviewing your report is a no-brainer first step if you've been denied a bank account recently.

If you spot an error, you have the right to dispute it directly with ChexSystems, and the agency is required to investigate within a reasonable timeframe.

What to do if you have a negative ChexSystems record

Having a negative ChexSystems record doesn't mean you'll never be able to open a bank account. Key steps include disputing inaccurate items, asking the reporting institution to update records after resolving debts, looking into second-chance checking accounts, and considering credit unions which are sometimes more flexible.

For more on how to reopen a closed bank account, see our dedicated guide.

ChexSystems vs. credit bureaus: what's the difference?

ChexSystems tracks your deposit account history, while credit bureaus (Equifax, Experian, TransUnion) track your borrowing history including your full credit report.

Your credit score does not affect your ChexSystems report, and your ChexSystems record does not directly affect your credit score.

If you're also working on building or rebuilding your credit score, Kikoff can help you establish positive payment history with no hard credit check to get started.

Conclusion

ChexSystems is effectively a banking history report that lots of financial institutions use to screen applicants before opening new deposit accounts.

The good news is that ChexSystems records generally expire after five years, errors can be disputed, and there are banking products designed specifically for people navigating these situations.

And if improving your overall financial health is on the agenda, Kikoff can help you start building a positive credit history alongside the steps you're already taking to get your banking record in order.