Beyond Credit Reporting Agencies—ChexSystems
Even after you’ve addressed what’s on your
credit report to the best of your abilities, some people
have yet another thing to worry about, and it’s
called ChexSystems. ChexSystems is a central clearinghouse
of information about how each person handles their checking
accounts. If you have ever written a check and had it
come back for non-sufficient funds, ChexSystems will
have a record of this instance of insolvency.
If you want to open up a checking account at a new
bank, because you have moved, or want to take advantage
of a special promotion, the new bank will check your
ChexSystems report. If you have any negative reports
on ChexSystems, most banks will refuse to open an account
for you. This creates a major problem for someone looking
for a subprime mortgage. Nobody is going to lend you
money if you don’t have a bank account.
The negative marks stay in your ChexSystems report
for five years, and it’s virtually impossible
to get it stricken from the record. Whether your bad
check was an attempt at fraud, simple negligence, or
an honest mistake, the negative mark remains on your
credit report for a significant period of time.
One thing to watch out for is overdrafts. As a result
of recent legislation, the “Check 21” Act,
all banks now exchange electronic images of checks,
instead of the paper checks themselves. Now, a check
can clear in a matter of hours, instead of days, even
if it originates from out of town. The days of writing
a check in the morning and depositing money in the afternoon
to cover the negative balance are over.
If you have been reported to ChexSystems, don’t
close your existing checking or savings accounts, because
you may not be able to open another one. Make any bounced
checks good and clear up overdraft fees, and request
that an explanation of the situation be added to your
If you do find yourself without a bank account, there
are still some banks that do not use ChexSystems, so
look around, find a bank that is not a member of ChexSystems,
and open a new account and keep it in good standing.