When the subject of credit scores comes up, many of us immediately think of FICO scores and credit bureaus. However, there is more to consumer behavior reporting than just what falls under the heading of “traditional” credit reporting.
One of the financial scores that you might not be aware of is the report issued by ChexSystems. This is a company that keeps track of your banking habits, as reported by your financial institution. Credit unions and banks report when you bounce a check or overdraw your account. Other financial institutions can then look at your report and make a decision about allowing you to open an account.
Banks Consider Consumer Financial Habits, Too
Most of us take it as a matter of course that you should be able to open a bank account with a minimal amount of fuss. However, some banks (not all) first consult ChexSystems. If you have overdrawn your account, or bounced checks, it shows up. Some banks have a policy of not approving the applications of consumers who have this information on a ChexSystems report.
ChexSystems is almost an entirely negative reporting agency. If you haven’t had issues with your bank account, then nothing will show up in this report. Some banks won’t deny your application unless you have multiple offenses. Others will deny your application after a single offense. Before you open an account at a bank or credit union, consider calling to find out if there is participation in ChexSystems. (There is a list of non-ChexSystems financial institutions you can start with.)
What Can You Do about a ChexSystems Report?
If your financial institution makes use of ChexSystems, there isn’t a whole lot you can do about the report. If you are in the habit of overdrawing your account, you might consider changing some of your financial behaviors. However, even if you have changed your habits, an offense remains on your ChexSystems report for five years. There is no getting around an accurate report.
Since ChexSystems is considered a consumer credit reporting agency, so you do have some recourse if the record is inaccurate. As with any credit report, you can request corrections to your ChexSystems report. If there is an inaccuracy, gather the evidence if you can, and then file a formal dispute. You can also contact the financial institution for help clearing up the dispute. If there is an error, ChexSystems has to correct it within a reasonable amount of time.
Realize, too, that, since ChexSystems is considered a consumer reporting agency, you are entitled to a free credit report each year. We are so used to the “big three” credit reporting bureaus as representing credit, that we sometimes forget that it’s possible to get a free report from elsewhere. Under the Fair Credit Reporting Act, and under the Fair and Accurate Credit Transaction Act, you are entitled to a free report from ChexSystems.
This is a report that you should check regularly. It can impact your ability to open a new account at some financial institutions, and it is yet another example of how your consumer habits are being scrutinized. Your ChexSystems report may not have the same impact as a FICO score or a full credit history, but it does matter in some cases.