The Uses of ChexSystems

ChexSystems can be used to verify a person's banking history and credibility, such as debt, overdrawn accounts, history of bad checks and fraud. Like credit bureaus, ChexSystems is a consumer reporting agency that records negative transactions and keeps them for years. Credit companies and businesses can access ChexSystems, so this can affect your approval for bank accounts, credit cards, and loans.

Scores

Unlike the credit bureaus, ChexSystems does not assess risk scores, but only records events that will stay on your record for three to five years. Trying to open a new bank account when you owe a balance to another, no matter how small, will be reported to Chexsystems. Although not all banks use this service, the ones that do will require you to settle other balances prior to opening a new account.

Efunds

Efunds, a service provided to ChexSystems members, verifies the history of a check writer at the time a check is presented. The Efunds system does not verify if funds are available, but it will report a person's history of bounced checks. The Efunds system does not count time since the last bounced check, so it can locate incidents from as long ago as 10 years, which can lead to the rejection of a good check.

Bank Fraud

ChexSystems keeps track of all fraudulent or suspicious activity on a person's account. Although banks will discard non-fraudulent ChexSystems entries within three years, all fraud entries will remain with ChexSystems for five. A misconception about fraud is that you have to intentionally con the bank or another individual. For example, a person who bounces 10 checks in a month might be reported for fraud. Fraudulent activities can include false checks, forged signatures, large overdrafts, and numerous bad checks in a short time.

Fair Credit Issues

ChexSystems is required to follow the Fair Credit Reporting Act as applicable, such as by providing free yearly reports to consumers. Negative reports are held on ChexSystems for only three to five years, even though credit bureaus hold them for seven years, with bankruptcies now being held for 10. All ChexSystems issues can be resolved within 90 days of settling balances with banks.