ChexSystem is a consumer-reporting agency that collects information about suspicious account activities in your checking accounts. These suspicious activities include, but aren’t limited to, account misue or fraudulent activity that has occurred within the previous five years. When you plan to apply for a new checking account, banks and credit unions may review your ChexSystem report before approving or denying your request.

The duty of ChexSystem is just like the major national consumer credit bureaus. According to The Fair Credit Reporting Act, you can request one free copy of ChexSystem record online each year. You also have the right to use this record in order to argue in a decision that denies your application for a new account.

Instead of recording your credit history, ChexSystem records your checking account history. In a report of ChexSystem, you could find lots of useful information about your financial well-beings, which include:

  • Identifying information. This includes your name, Social Security number, and your current as well as past address.
  • Negative records, including overdrafts or accounts closed involuntarily. Sometimes the bank might close an account when this account has been suspected to commit fraud of when the account holder keeps writing bad checks.
  • Suspected fraudulent activity. This might include debit card or ATM abuse such as depositing empty envelopes when making a deposit at an ATM.
  • Account inquiries or applications for other bank checking accounts. This usually refers to excessive application of new accounts. If you apply for multiple accounts in a short period of time, you might receive a red flag for potentially fraudulent activity.

ChexSystem generally keeps your record for five years, even if you have some negative records. When you apply for a new checking account, financial institution would inspect your record in ChexSystem. However, different financial institutions have different rules about how much time must pass after a negative incident before you can open a new bank account. Thus, it’s always commendable not to leave any negative records in ChexSystem.

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