ChexSystem, developed in the 1980’s, is a networked computer system that records a person’s poor credit history. 80 to 90% of banks subscribe to ChexSystem, use it to report someone who is a credit risk, and use its information to make decisions about customers. Once a person is deemed a “credit risk” on ChexSystem, their name stays in the system for five years. It is estimated that anywhere from 7 to 19 million people are in the ChexSystem database.

A similar system is maintained by Telechek, although it is not as widely used.

CRITERIA FOR A CUSTOMER BEING REFERRED TO CHEXSYSTEM

Overdrafts (bounced checks), abuse of bank services, or any fraudulent activity can result in being referred to ChexSystem. The time allotted for correcting an overdraft varies from bank to bank. Some banks report the problem after 30 days. The amount of the overdraft does not have to be substantial to be reported. Some banks report the problem for any overdraft over $35.

Suggestions:

• Take care of bank problems immediately, no matter how small.
• Avoid overdrafts – it costs you extra money and causes problems.
• Help avoid overdrafts by knowing your bank balance.

REMEDY

The initial step in correcting the problem is to settle the financial problem that caused you to be in the system. Your name will still be in ChexSystem for five years, but this is a start.

Banks have varying leniency policies for people in the ChexSystem. Unfortunately, a majority of banks will not take a financial risk with someone in ChexSystem. There are, however, some factors that may help bank personnel see you are worth the risk. If you can make such a demonstration of strength, you need to present your situation to the branch manager. Branch managers will be reluctant to go out too far on a limb, but they do have some discretion.

A strong display of financial stability for 1 to 3 years may convince some banks that your risk factors have been reduced. Signs of financial stability include steady employment and paying rent/utilities on time. A demonstration of financial stability may help you to open a bank account.

As an American citizen, you have the right to a report about the information ChexSystem has recorded about you. If you have been denied a checking account within the past 60 days, the report is free. After 60 days, a charge of $8 is attached.

The contact address for ChexSystems are the following:

When contacting ChexSystems, be sure to include your name, address, and social security number.

OPTIONS FOR PEOPLE WITHOUT BANK ACCOUNTS

If you receive a form of payment from the federal government – salary, social security, or any other government benefit – this money can be deposited into an Electronic Transfer Account. You can use an ATM card to receive cash, thus eliminating much of the inconvenience of not being able to write a check.

Seek a credit union that may be sympathetic to your situation, a Credit Union associated with your type of faith or work. Examples of specialized credit unions are a Catholic Credit Union or a Teachers Credit Union.

AVOID

• Avoid banks that place a hefty charge on each check you cash. This only adds to your debt.
• Avoid websites that require you to join their sites for a “free list” of banks that do not subscribe to ChexSystem. These banks are probably young banks that will subscribe to ChexSystem in the future. You can find these banks on your own.
• Be sure to check out any bank for stipulations that are financially extreme.
  The Better Business Bureau is a good place to start, http://www.bbb.org/BBBcomplaints/.

Printer Friendly Version