Get Out of Chexsystems
Get Out of Chexsystems
If you don’t know what Chexsystems is that I can say it’s probably a good thing. You’re more fortunate than a good portion of the US population whose daily financial transactions are affected by the fact that they can’t open a regular checking account. Sometimes it’s because of big mistake like regularly giving out bad checks. Other times it’s because of small mistake like overdrawing an account and forgetting to pay the balance. There even are occasions where it’s a case of identity theft and then the victim is left with all sorts of financial problems including a negative Chexsystems record.
Regularly, on this website, we get questions from people asking us what is Chexsystems. You see. Every time you have an issue with a financial institution, that company keeps a file so that they can have a record. With that record, this company can now protect itself and decide whether or not they want you as a client. But that doesn’t keep you from going to another financial institution and doing the same. So instead of keeping individual records, financial institutions have decided to join together and report all customers who have mishandled their accounts to a single database. If you look at It That Way, Chexsystems is pretty much a credit reporting agency whose only clients are financial institutions.
Now as we said previously there are a number of reasons why a bank can have an issue with you and ultimately decide to close your account. Serious offenses like fraud will most likely keep you out of the financial system for a very long time. Even the prepaid debit cards, which you can use as substitutes for regular checking accounts, usually specify that if you have been involved in fraud you can’t use them. The kind of help that you need in that case is beyond the scope of this website.
If you have been a victim of identity theft, then someone has probably run up thousands of dollars of debt under your name and in many cases have overdrawn your account up to an amount that you cannot possibly pay back. Once that happens the bank decides to close your account and report your information to Chexsystems. Now you have a bad record through no fault of your own. Of course there’s an entire industry devoted to helping people deal with identity theft. But in the meantime, you’re left unable to have a regular checking account.
Another reason why banks can decide to close your account can be what they call excessive overdrafts. That happens when you repeatedly draw more money from your account than your balance allows. The bank then closes your account and reports the whole thing to Chexsystems. There are also cases where people end up with a negative balance and decide not to pay it back. Same thing happens, the bank closes the account and the client is reported to Chexsystems.
We have enumerated quite a few possibilities that can lead you to have a Chexsystems record. Unfortunately, Chexsystems does not differentiate between the various causes for reporting. Member institutions usually don’t file more information than “closed for cause”. So even if somebody wanted to have more information about why you have a record they don’t really have anything to work with.
What can make it even worse is that even if you do solve the situation, Chexsystems is not required to remove your record. It will only do so if the financial institution that reported you in the first place write them and tells them that such and such situation has been solved. Since any information that appears on your Chexsystems records stays there for five years you can imagine that it’s not something that you can’t afford to wait out. Whenever you have any Chexsystems record, you should do whatever is in your power to either correct it it’s a mistake or solve it.
It sometimes happens that people have a file on Chexsystems but never know that they do. How can that happen? Well, let’s say that you have accounts in two banks and one gets overdrawn and closed. But you have never had a problem with the other one. What is going to happen is that as long as you don’t try to open a new bank account you may never know that you have been reported. Actually it is when trying to open a new checking account that most people find out that they have the negative Chexsystems record. Now if you’re reading this and wondering about your status, it might be good for you to know that Chexsystems is governed under the law as a credit reporting agency. As such, they are required to abide by the same legal requirements as the major credit bureaus. One of those requirements is that you are entitled to a free report every year. You can use that to check how your banking profile is evolving over the years.
In case you already have a file, there are a few options that you can explore. The first order of business is to start looking for ways to have your name removed from there. If you have been reported because of unpaid overdrafts, you should go to the banks that you owe money to and offer to pay back what you owe in exchange for them writing Chexsystems and having your account cleared. If you have been the victim of identity theft, gather all your evidence and present it to the banks that have reported you so that they can write Chexsystems and clear your name. In both cases, it is not going to be an easy process nor a short one. That is why, while you’re doing it, you may have no choice but to get bank account alternatives like the Excella prepaid visa debit card or the Western Union reloadable Visa prepaid debit card. You can also try Peoples Cash Solutions or do an online search for fresh start checking accounts. They are not perfect financial products. They have their own set of fees and their own inconvenience. But at the same time not having a checking account only turn out to be really really expensive.