If you have ever written a bad check or overdrawn a checking account, watch out. You may end up with a negative in a credit reporting agency called ChexSystems.
According to their website, "Chex Systems, Inc provides deposit account verification services to its financial institution members to aid them in identifying account applicants who may have a history of account mishandling (for example, people whose accounts were overdrawn and then closed by their bank)." That means you don’t want to get reported to ChexSystems.
Right now, I am trying to help a friend get his ChexSystems report cleared. A few years ago, he went into what was then "P" Bank (I am not naming names since there are other banks still around with a similar name) and was told he could not open a checking account because he had $287 in unpaid checks reported to ChexSystems. Problem was, he never had a bank account with P-Bank…in fact, he had no bank account at all for years. "Show me the copies of the bounced checks and I will pay them off right now," he said, producing a walletfull of cash. The bank told him he would have to pay for the research to find the original checks, but he refused to pay for their mistake, and left.
Fast forward a couple of years, and he can’t open any bank account anywhere because of this item in his ChexSystems file. (Consumers can request their ChexSystems file, if they have one, for free here.) Since P-Bank branches here have been sold, I figured if he disputed the item it wouldn’t be verified and it would be removed per the Fair Credit Reporting Act.
But when he disputed the item, he received another letter back from ChexSystems with a different financial institution listed, along with the check numbers for the alleged bounced checks. He called the number listed for the financial institution that apparently had bought the account from P-Bank. I joined him using three-way calling for what turned out to be a bizarre series of phone calls. After at least an hour of calls to various toll-free numbers, he finally found a customer service representative who told him there was only a 45 cent balance left on the account, and that she would "mark it as paid." She clearly didn’t believe him when he insisted he never had an account at that bank, and made it sound as if she was being very generous to mark the item as paid. No one he spoke with could offer any proof that the account was his, or provide any documents with his signature.
He could try to pursue this further with a consumer law attorney, but the five-year time limit that ChexSystems applies to reporting negative information is soon up, so the item should come off his report soon. In the meantime, if the balance shows zero, he should be able to open a new bank account. We hope.
Have you had an experience with ChexSystems? Share your comments — and suggestions — in the comments section below.
Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.
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Small lenders that give signature loans which say they do not do a credit check use services like the one above to evaluate your “credit worth”.
Nice article, very informative.
I got my name taken off the chexsystems database. by chance i found a website http://www.adviceontime.com and under the banking section they suprisinly had a free letter that really worked.
I am so fed up with this…I am in the military and about 2 years ago, I tried to open a local bank account out of convenience. I was told that I was reported to TELECHECK for an outstanding debt to a bank that I’d never heard of. I immediately contacted that bank and they stated that they had no record of my SSN, name or address on file. They also stated that they did not use TELECHECK. Hmmm. I figured it was a scam since nothing ever showed up on my credit reports. Fast forward to this week (Jan 09) and I tried to open a joint bank account with my new husband. Lo and behold, I was told that I was reported to CHEXSYSTEMS for closing a bank account with a negative balance in 2003. Now, this makes no sense. I’ve had the same faithful bank for over 10 years with no problems- not even an overdraft. Also, from what I’ve read, CHEXSYSTEMS keeps info for only 5 years, so why am I seeing this 6 years from the supposed account being closed? If I had an account somewhere that had outstanding balances, why was I never notified before this? I have always had my mail forwarded. Now I’m waiting to see what “Financial Institution” is reporting on me now and I’m very concerned that I may be a victim of ID theft. Oh, and I was also deployed to Afghanistan during most of 2002 and 2003 and didn’t do ANY kind of banking. Thanks for posting this, it’s nice to know I’m not alone.
Confused,
This is terrible. I am so sorry to hear you are going through this. I wonder if your Senator or Congressional Representative’s office will help go to bat for you to get this cleared. It may be worth a shot.
I am so sorry you are going through this on top of the stress you are under serving our country.
My son and I went to Bank of America today to open him his FIRST checking account. He is 18 years old. He got his student loan checks today and wanted to deposit them. We figured the CampusEdge account would be best for him. So, upon the manager running his SSN, he came back rejected from ChexSystems. He has NEVER had a checking account and his savings account was closed last year by him to get his father’s name off of it. And according to his statements, he never was overdrawn. As soon as we got home, I sat down and ordered his CS Report via the internet. I had a friend of mine run his credit report which came back clean. I am afraid they have my son mixed up with his father, who has the same name or my ex has opened up and screwed up an account using my son’s name and SSN. Can anyone tell me how to fight this?
Karen – Chexsystems is a national consumer reporting agency. They are required to follow the Fair Credit Reporting Act. You are entitled to a free report from Chexsystems once a year, and in the case of adverse action.
If I understand you correctly, you requested his Chexsystems report and there was no negative information in your son’s file. Is that correct? What exactly did you get from Chexsystems? A notice that there was no file?
If that’s the case, then the only thing I can imagine is that the bank pulled the wrong report. I’d go back to the bank with a copy of your son’s Chexsystems report (or whatever they gave you) and ask them to explain the discrepancy. If that doesn’t work, let me know.
Gerri
Quick question:If you overdraw your bank account and it is closed due to being overdrawn, you are usually reported to Chexsystems or something similar. Does this also go against your “normal” credit report? Trans Union, Equifax, Hesperian? Does a closed bank account in bad standing also hurt your traditional credit score?
Thanks.
Ben – No. An overdrawn checking account is not normally reported to TransUnion, Equifax or Experian so it won’t affect your credit scores. However, if the balance is turned over to a collection agency, that could appear on your credit reports and affect your scores.
Nice article, very informative article