What is the ChexSystem?

Published: Oct. 8, 2021 at 11:59 AM EDT
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RICHMOND, Va. (WWBT) - If you are having a hard time opening a bank account, there may be a reason you’ve never heard of it before: The ChexSystems. It’s basically a warning system between financial institutions to be wary of consumers that might have risky behavior when it comes to their bank accounts.

Cherry Dale, a Financial Coach with the Virginia Credit Union, says it’s the credit report system for banks and credit unions.

When you bank at any financial institution they run your name through the Chexsystems. If anything negative happens with your account, for example, you overdraft and do not pay the bank back, they have the right to report it.

Dale says it’s not your credit report, so it’s not exactly impacting your credit.

“What it does is it feeds into this system where financial institutions communicate with each other,” Dale said. “They know, you bank there and they owe that financial institution $300 from an overdraft. Then you try to go up to another financial institution and open up an account and they will run your name through the system and that will show up.”

The ChexSystems is regulated by the fair credit reporting act and consumers do have the right to get their Chexsystems report. If you don’t have a report, it means you haven’t had any negative behaviors with a bank.

If you do have a report, check it for discrepancies and you can dispute items in it or ask a financial institution to remove something.

Information can stay on your ChexSystems report for five years.

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