What are the alternatives to Chex systems
Little of people realize that there are several consumer companies that keep track of your account activity. If you go below zero in your checking account more than the occasional time, these companies can create problems for you. Many of these companies, like the major credit reporting agencies, are regulated under the Fair Credit Reporting Act (FCRA).
The two main types of transactions that cause problems are:
- Bouncing a check - when you write a check but it is returned free if someone tries to deposit or cash the check
- Insufficient Funds - If there were any fees on your account (including checks you write and electronic transfers) your account balance would be below zero
ChexSystems is one of the companies that will track your banking behavior. ChexSystems is mainly used by banks and credit unions when it comes to opening a checking account for you.
It is risky for customers to routinely bounce checks, so many banks do a prospect search before opening accounts. Other companies like TeleCheck, Certegy, and Early warning systems provide similar reports.
What ChexSystems does
ChexSystems keeps a record of people who spend (in one way or another) more money than was available in their checking accounts, as well as those who have violated other banking policies. If you have withdrawn checks or owed money to a bank in the past, there is a good chance you are in the ChexSystems database.
Banks and credit unions inform ChexSystems about your banking behavior, and other sources help too. Then financial institutions buy reports from ChexSystems to find out if you have had problems with other banks.
The main report from ChexSystems contains only negative information. In other words, you will only have a report on this report if you have withdrawn checks or overdrafts on your bank accounts. If there's nothing on your ChexSystems report, that's a good thing - and it's different from credit reports for credit, which is better when you can show a solid history of borrowing and repayment.
Negative records are retained with ChexSystems for five years or until the bank or credit union that reported the problem requests that they be removed.
However, incorrect entries can be challenged (they will be removed if you can provide sufficient evidence of a mistake or identity theft).
ChexSystems does not decide whether or not you are allowed to open a bank account. Banks make this decision based on their guidelines - but you will be luckier if your ChexSystems report is clean.
Get scores and reports
As with all consumer evaluation agencies, ChexSystems is required to provide you with a free copy of your report every year, free of charge. Details on how to order a report can be found on the ChexSystems website. ChexSystems also creates a consumer score, a number that you can use to predict your future behavior. You can also order your score, which is offered for free at the time of this writing (but consumer reporting firms are allowed to charge for scores).
If your ChexSystems report makes it difficult to open an account, you need to find a bank or credit union that is willing to work with you. You have several options.
No test: Not all banks use ChexSystems reports. Find one and they won't turn you away based on the contents of these reports. Small local banks and credit unions are your best choices.
Make an exception: Sometimes it is possible to take your case - explain what happened to your checking accounts in the past and why you don't expect the same things to happen in the future. Here, too, your chances are best with a small institution.
Second chance: Some banks are politically willing to open accounts for people on bad checklists. These accounts, known as "second chance accounts," give you less freedom to spend, but at least you can sign up for a direct deposit, save funds, and earn interest. Over time, you can work your way back to a fully functional bank account.
Stop bouncing tests
To avoid problems in the future, keep a security sticker in your checking account. Start rebalancing your checkbook on a regular basis and see if alternative payment methods work better (e.g. a debit card that will be immediately rejected if you run out of funds).
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