Everyone has heard a horror story about ChexSystems and trying to get off Chexsystems. Why do bank use ChexSystems?

The idea behind ChexSystems was originally a good one – merchants wanted to know who the bad check writers were, and felt that sharing information would be a good way to keep from being ripped off by people who habitually wrote hot checks.

However, the banks jumped on this as a way to weed out “undesirable customers”, and ChexSystems was developed into a huge consumer credit reporting agency similar to Experian or TransUnion – only ChexSystems focuses solely on banking and check-writing history.

When you apply to open a checking account, most banks will use ChexSystems to run your name, social security number, and driver’s license number. This can usually tell them what bank accounts you’ve ever had, and more information about you, including if you’ve ever bounced a check, had an overdraft, deposited a bad check, or withdrawn more than you should from an ATM.

ChexSystems allows not just merchants, but financial institutions to report individuals who are seen as those who “mishandle checking and savings accounts.” If your name ends up in the ChexSystems database, opening a new bank account can become very difficult – and information stays on your record for five to seven years!

A negative ChexSystems report doesn’t affect your ability to use credit, but can damage your check-writing privileges and even be considered by banks seeking to make you a loan if your raw “ChexSystems Score” is low.

However, banks do have their reasons for using some sort of reporting system. Financial institutions lose billions of dollars every year because of check fraud and abuse/ This means that over 80% of US banks, especially large banks, use ChexSystems, and finding a bank that doesn’t use ChexSystems can be difficult.

Many people don’t even know about ChexSystems until a problem pops up The real issue is that ChexSystems isn’t error free, and people can have a lot of trouble getting bad information off of ChexSystems since there is no profit in correcting records or penalties for delivering false information.

Many people have complained that some banking institutions are using ChexSystems indiscriminately to get rid of huge blocks of customers, whether they are actually habitual bank account abusers or just made a mistake or two along the way.

If you are reported to ChexSystems and you think there’s been an error you should contact CFS to help you. Your bank may not be willing to work with you, and ChexSystems has a convoluted, lengthy, and frustrating process that must be completed to correct bad records.