How to clear up your ChexSystems report

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Opening a new checking or savings account can be difficult if you have a spotty banking history.

Banks and credit unions report negative account activity such as involuntary account closures, habitual overdrafts, and suspected fraud or identity theft to ChexSystems, a specialty consumer reporting agency that financial institutions use to screen account applicants.

Like credit reports, it’s possible for ChexSystems reports to contain errors or be out of date. If you’re not sure why your bank account application was rejected or you want to clear up incorrect or outdated ChexSystems information, here are the steps to take.

1. Get a copy of your ChexSystems report

The first step is to order a copy of your ChexSystems report. Visit the CheckSystems website and click on “request your report,” or you can call ChexSystems at 800-428-9623 and follow the automated prompts.

“A ChexSystems report is something consumers are entitled to for free once every 12 months,” says Greg McBride, CFA, Bankrate chief financial analyst. “Check to see if you even have a report; you likely won’t if you haven’t overdrawn accounts or had them closed on you.”

ChexSystems retains reported information for up to five years. If you pay off a negative balance with a bank, ChexSystems doesn’t have to remove the report, but it must update it to show that you are paid up. You can view a sample ChexSystems consumer report on its website.

Your ChexSystems report might contain information from Certegy, another consumer reporting agency that offers check authorization services to merchants. You can get a free copy of your Certegy report. Call 800-237-3826 and use the automated system or follow instructions for making your request by mail or fax.

2. Dispute errors in your report

The federal Fair Credit Reporting Act (FCRA) gives consumers the right to dispute erroneous or incomplete information in their consumer reports and request an investigation. The FCRA also requires that mistakes be corrected in a timely manner, usually within 30 days.

You can submit your dispute on ChexSystems’ website, by mail or by fax. The ChexSystems homepage has links and clear directions to guide you.

Include all relevant documents to support your dispute. Send copies, not originals. If you have witnesses who can attest to your version of events — for instance, if a customer service representative at the bank believes that you are a victim of identity theft — include their names and contact information.

Keep a paper trail by making copies of everything, so that no information gets lost. If you send your dispute by mail, get a mail tracking number.

3. Settle your debts

If you have a negative bank account balance or owe fees, pay off the debt. Ask for written proof that you have settled up and hang on to the receipts and documentation.

If the amount is more than you can pay at once, try to negotiate a lower amount or a repayment plan. It’s important to stick to your promise to repay and avoid making your banking history worse.

4. Request an updated report

After you’ve repaid your bank or other creditors, ask them to update your ChexSystems report. Once your report is updated, get a copy of the report and retain it for your records. With a clean record, you should be able to qualify to open a bank account.

Other possible actions

You can also file a complaint with your state attorney general and the Consumer Financial Protection Bureau, which oversees credit reporting agencies.

As a last resort, you can file a lawsuit under the FCRA against ChexSystems or the bank. The National Association of Consumer Advocates might be able to help you find an experienced lawyer. Look for one willing to handle your case on contingency, which means the lawyer gets paid only if you win the case.

In many cases, there may not be a way to clear up your report, if everything reported is accurate. But the report isn’t permanent. You just have to wait for negative information to drop off your file — usually it’s removed after five years, though in some cases may remain up to seven years.

Consider a second-chance checking account

As you wait for negative information to be removed from your report, you can try to rebuild your reputation with the banking industry by opening a second-chance checking account.

Second-chance checking accounts usually have minimum funding requirements, monthly fees and fewer conveniences than regular checking accounts.

But after proving your reliability, you might be eligible for a regular checking account, a savings account and other bank products that are available to consumers who have shown they can responsibly manage them.

Ask the bank how long your probation period must last before you can switch to a new bank account.

Bottom Line

It’s important to be aware of ChexSystems and how it can affect your ability to open a new bank account.

If your report is holding you back from opening a bank account, a second-chance checking account can help you rebuild your reputation with banks and ultimately gain access to more financial products. Remember, taking action and being proactive is key in navigating the ChexSystems process. Don’t let past mistakes hold you back from financial stability and freedom.

– Bankrate’s René Bennett contributed to an updated version of this article.