Chex Account

Credit card applicants are aware of credit bureaus and the “FICO” scores that impact their ability to obtain credit cards and the interest rates available to the individual, etc.  Consumers have less understanding of and visibility into the mechanism used by “ChexSystems”, the organization that provides account-holder reliability data to banks, savings and loans, and other institutions that provide checking accounts to individuals.

The relative obscurity of the ChexSystems derives from two factors: one being that there is no pure “score” on record, and the other being that only negative consumer actions or “failures” are recorded, whereas credit account scores are positively influenced by balance payoffs, etc.  Many individuals are negatively affected in terms of being refused a checking account on the basis of past history of overdrafts, bounced checks etc. reported by another institution to ChexSystems.  These problems remain on record for five years, unless the reporting institution withdraws its report.

The best way to respond to a disapproved account application is to log on to www.chexhelp.com to investigate the source of negative information.  It may be that a problem you have already corrected could have been cleared from your history except for the failure of the institution with which you had been dealing.  ChexSystems also allows for consumers to post rebuttals or explanations for past account problems.

Lists of banks and S&L’s that are not part of the ChexSystems network are readily available form many Internet sources.  Avoid any list sites that charge a “membership” fee.  Many of these banks refer to their accounts as Second Chance Checking Accounts or Second Chance Banking.  About 20% of banks nationwide do not use ChexSystems.

ChexSystems-participating banks use the reports at their own discretion.  During the last decade, due to heavy consumer criticism many banks became more lenient.  Some institutions now ignore negative reports that are three years old as opposed to the five-year standard.  Other banks have raised dollar level of unpaid overdrafts from $25 to $100 as a threshold for refusing an account.

Besides the aforementioned rebuttal/explanation approach one can use directly to ChexSystems, many individuals can gain relief by contacting the manager of the refusing institution.  It is strictly their choice as to whether the ChexSystems report should be grounds for refusal.  A successful request for leniency could be based on increased financial health of the individual or couple, or on many other factors including a questionable origination of the negative report.

The deep economic recession of the past few years is beginning to push more institutions towards greater leniency in using data from the reports.  One reason is simply that there is a greater percentage of the populace that has ChexSystems records, and therefore a shrinking pool of “low-risk” account applicants.  Banks need to accept new accounts to keep their financial base, and consequently must accept applicants with records that are marginally risky.  That is, they may choose to accept applicants with minor problems in the system.

From the applicant’s perspective, the recession has produced tremendous turmoil in employment markets.  Many who have lost a job and who required a period of time to obtain a new one have experienced unpaid bills, bank overdrafts, and other problems in the interim.  Finding a new “permanent” position should restore the applicant to low-risk status for consideration for a new account, despite the reported problems.

Individuals without a steady source of income need to carefully consider any accounts that are available, since high-risk accounts often come with high fees that can compound financial difficulties.