If you were denied a checking account or your bank closed your account, it might be due to a ChexSystems report. ChexSystems is used by many banks and credit unions to blacklist customers who have made banking mistakes like bounced checks, excessive returned checks, non-sufficient fund (NSF) charges, or too many transfers or withdrawals. Being on the blacklist can make opening a checking account difficult for five years.
Fortunately, there are banks that don’t use ChexSystems at all.
These “No ChexSystems Banks” offer all the services you need with surprisingly high acceptance rates. CheckingExpert has helped thousands of people find these banks based on acceptance rates, checking account features and benefits, and the accounts with the lowest fees. You can open an account today!
What are the Best Banks That Don’t Use ChexSystems?
- Best No Opening Deposit Bank: Chime
- Best Account to Build Credit: Current
- Best New Account Cash Bonus: U.S. Bank
- Strong Branch Network: Chase
- Best Business Checking: Found Banking
- Best Rewards Checking: Upgrade Rewards Checking Plus
- Best Fee-Free Account: SoFi
What is ChexSystems?
Most consumers aren’t familiar with ChexSystems until they’re denied a new bank account or a merchant declines to accept their check. Briefly, ChexSystems is a consumer reporting agency (CRA) that tracks your checking and savings account activity.
Its business is pretty simple. Banks contribute data about all of their checking account customers. For consumer accounts, the social security number is the key identifier. Banks also contribute information about the health of these accounts. If a consumer has bounced a lot of checks or has unpaid fees, the bank will also report that information to ChexSystems.
Then ChexSystems creates an aggregated database not only from the bank in our example but from more than 80% of all remaining banks and credit unions. ChexSystems holds this information on over 300 million people and companies!
If you have negative marks entered by a bank, that information is available to EVERY bank and credit union that subscribes to the ChexSystems database. And all any bank or credit union needs in order to check your banking history is your social security number. A social security number is required to set up a checking account.
What causes people to get reported to ChexSystems?
People get reported to ChexSystems when they have problems with their bank accounts, such as:
- Bouncing checks or having insufficient funds to cover transactions.
- Not paying overdraft fees or other account fees.
- Misusing or abusing their accounts, such as using them for fraud or illegal activities.
- Having their accounts closed by the bank for negative reasons.
Can I dispute items on my ChexSystems report?
Yes, you can dispute items on your ChexSystems report if you have concerns about their accuracy. Under the Fair Credit Reporting Act (FCRA), as a consumer, you have the right to challenge any information that is incorrect or incomplete in your credit reports, including those from ChexSystems.
However, it’s important to note that disputing ChexSystems reports can sometimes be a challenging process, especially if the information on your record is accurate. For example, if you were added to ChexSystems due to a minor infraction such as failing to pay a small overdraft fee, simply requesting the removal of the record may not be sufficient to get it expunged from your report.
It’s essential to keep in mind that ChexSystems is not necessarily concerned with fairness or the relevance or currency of the information it holds. If a record is on file, it typically remains there for a period of five years from the date of the infraction unless your dispute is successful.
Therefore, while you can dispute items on your ChexSystems report, it is important to gather evidence and present a strong case to support your claim. This may involve providing documentation or proof that the information is inaccurate or incomplete.
To initiate a dispute with ChexSystems, follow these steps:
- Contact ChexSystems: Reach out to ChexSystems and request a free copy of your ChexSystems report. This report will provide you with detailed information regarding your banking history and any negative records.
- Review the report: Carefully review the report for any inaccuracies or incomplete information that may be harming your banking history. Make a note of these erroneous records or incomplete information.
- Gather evidence: Collect all necessary evidence that supports your dispute. This can include bank statements, receipts, or any other relevant documents that prove the inaccuracy or incompleteness of the information.
- Draft a dispute letter: Write a formal letter to ChexSystems, clearly outlining your dispute and supporting it with the gathered evidence. Explain why you believe the information is incorrect or incomplete and provide any additional relevant details. Keep a copy of this letter for your records.
- Submit the dispute: Send the dispute letter to ChexSystems through certified mail with return receipt requested. This ensures proof of delivery and gives you a record of the dispute being initiated.
- Maintain records: Keep copies of all documents, including the dispute letter, supporting evidence, and any communication received from ChexSystems. These records will be crucial throughout the dispute process.
- Wait for a response: ChexSystems is required to investigate your dispute within 30 days of receiving your letter. They will then provide you with a written report detailing their findings.
- Review ChexSystems’ response: Carefully review the response provided by ChexSystems. If they agree that the information is incorrect or incomplete, they will correct or remove the record from your report. If they disagree with your dispute, you have the option to add a statement to your report explaining your side of the story.
- Apply for a non-ChexSystems account: Regardless of the outcome, it is advisable to consider applying for a non-ChexSystems checking account while waiting for the dispute process to resolve. This will ensure you have a functioning bank account during this time. Keep in mind that the dispute process can be time-consuming and may take several weeks or even months before your record is cleared.
By following these steps, you can initiate a dispute with ChexSystems and work towards resolving any inaccuracies or incomplete information in your report.
What is the difference between banks that don’t use ChexSystems and second chance banking?
The difference between banks that don’t use ChexSystems and second chance banking lies primarily in their approach to reviewing an individual’s ChexSystems record when applying for a bank account.
Banks That Don’t Use ChexSystems:
When you apply for a bank account at these banks, your ChexSystems record will not be checked. This means that they do not consider any negative history or issues you may have had with previous bank accounts when deciding whether to approve your application. Usually, these banks have low or no balance requirements, though they may require monthly maintenance fees. However, you can still enjoy typical banking services like online banking and bill pay. Overdraft protection may also be offered.
Second Chance Checking Account:
On the other hand, second chance banking involves a more thorough evaluation of your ChexSystems record. Generally, these banks will review your history with previous bank accounts, which may include any overdrafts, bounced checks, or account closures. While some maintenance fees may be required, second chance banking also provides an opportunity for individuals to rebuild their banking history and regain trust. This means that as you establish a positive track record with a second chance account, you may eventually be eligible for a regular checking account. It’s worth noting that because second chance banks do check your ChexSystems report, they might have additional requirements. For instance, they may ask you to complete a personal finance class.
Both banks that don’t use ChexSystems and second chance banking offer individuals the ability to resume vital banking activities such as writing checks and using a debit card for purchases. While there may be minor distinctions between the two, both options serve as alternatives for people with a less-than-perfect banking history.
How many banks and credit unions in the US use ChexSystems?
According to eFunds, ChexSystems is utilized by more than 9,000 banks across the United States for screening purposes. These banks collectively operate over 100,000 branches nationwide. Impressively, the number of banks employing ChexSystems accounts for more than 80% of all financial institutions in the country.
Do banks and credit unions sometimes review credit reports when deciding whether to approve a bank account?
Yes, when individuals apply for a bank account, it is possible for certain banks and credit unions to evaluate their credit report by accessing information from major credit bureaus like Equifax, Experian, or TransUnion. The purpose of this assessment is to aid in the decision-making process regarding the approval of the bank account application and to potentially establish specific conditions, such as determining deposit limits, minimum balance requirements, or applicable fees. While it is not a widespread practice, it is worth noting that some financial institutions may choose to consider a prospective customer’s credit history as part of their overall evaluation process.
Do non-ChexSystems banks still review other records like TeleCheck or Early Warning Services?
Yes, some non-ChexSystems banks may indeed review other records, such as those maintained by TeleCheck or Early Warning Services (EWS). It is important to note that being listed with either TeleCheck or EWS might result in the rejection of a bank account application, even if the applicant does not have any issues with ChexSystems. However, it is worth mentioning that there are banks that do not reference any of these additional systems. Therefore, it is possible for individuals to have a record with ChexSystems but not with EWS or TeleCheck.
The best second chance banks by state
Most major banks aren’t no ChexSystems banks or offer second chance checking, but many community banks and credit unions have them under various names, such as “Opportunity Checking” and “Fresh Start Checking.”
Our editorial staff regularly updates the list of banks offering no ChexSystems and second chance checking in every state. Here’s an overview of these accounts and where you can find them at branches in your area. Click on your state to get the comprehensive list!
Ready for Your Second Chance?
If you’ve experienced issues with bad credit, checking account issues, or bounced checks, CheckingExpert can help you get back on track toward a healthy financial future. Our goal is to guide you through the complex financial roadmap to find the banks or credit unions that can best meet your needs.
The vast majority of the time, you can get a bank account with ALL the features and benefits you need with no fees, minimums, or restrictions. We’re glad you found us. Now, let us help you find the right financial partner for you.