Found Yourself On The ChexSystems Blacklist? Here's What You Can Do

People with bad credit get turned away from banks when they apply for a personal loan, but a poor credit score doesn’t mean they can’t open a checking account. For people who get scored poorly by Chexsystems, however, that is precisely the fate that awaits them.

If you’re one of these folks, don’t panic. There are steps you can take to try and raise your Chexsystems score and other options you can pursue if you still can’t open a traditional bank account. Sit back, take a deep breath, and learn what you need to know.

What is ChexSystems?

First things first: Who are these guys? Well, they’re a national consumer reporting agency that most banks rely on for information. Just like the three major credit bureaus (Experian, TransUnion, and Equifax) that track your use of credit, Chexsystems tracks how you use your bank accounts. If you have a history of bouncing checks and/or over drafting your accounts, that’s something banks want to know.

Credit bureaus maintain your credit reports. They contain the info used to create your FICO score, which is scored on a scale from 300 to 850. Chexsystems does something similar. They maintain Consumer Disclosure reports that track your overdrafts, bounced checks, unpaid fees, credit freezes, and more.

They also turn that info into a score, but this one is on a scale from 100 to 899. The higher your ChexSystems Consumer Score, the better—just like with your FICO score. If your score from ChexSystems is poor, most banks will deny your application for a checking account. In their eyes, you simply pose too great a risk!

What does it mean to be on the ChexSystems blacklist?

So the term “blacklist” is a little misleading, even though it’s how most people commonly refer to this phenomenon. It’s not as though ChexSystems has a giant list of names tucked away in a safe somewhere that banks consult when they have an application. The truth is a lot more informal than that.

To be “blacklisted” by ChexSystems effectively means that you have a very poor ChexSystems score. Due to a history of overdrafts, bounced checks, etc., your score is low enough that banks considering you for a standard checking account will likely deny you based on your risk profile.

Lacking a bank account can negatively impact your finances in many ways. You might have to carry cash around with you everywhere (which can be dangerous) and resort to check-cashing stores in order to access your money. Prepaid debit cards aren't always much better either; they usually come with a whole host of expensive fees.

The good news is that, unlike real blacklists, your status is hardly permanent. ChexSystems generally keeps information for five years, after which it drops off your report. So five years of good banking behavior will ensure that damaging information disappears from your Consumer Disclosure report. Once that happens, your score will rebound!

If you’ve been blacklisted, here’s what you should do.

Five years is a long time to wait just to get a regular checking account. In the meantime, there are actions you can take that might improve your score, possibly pushing it over the threshold that you need in order to open an account. Here are some steps you should take if you’ve been blacklisted by ChexSystems:

1. Request your Consumer Disclosure report: Just like the three major credit bureaus beholden to the Fair Credit Reporting Act, ChexSystems is required to provide you with one free copy of your report every 12 months. All you have to do is ask! You can contact Chexsystems by phone at (800) 428-9623 or you can request a copy on their website. Once you have your report in hand, you can review it to learn exactly why your score is so low.
2. Pay off any outstanding debts or fees: When assessing a consumer’s trustworthiness, unpaid debts (especially when they come from fees) is a huge red flag. While you’ll still get dinged for having these debts accumulate, paying them off will help. Try to pay them in full. If you can’t, try negotiating with your creditor to settle for a portion of your debt. Since businesses prefer getting something over nothing, they’re usually somewhat flexible. Once you’ve paid off the debt, ask your creditor to update your information with ChexSystems or to provide you with documentation so you can send it to ChexSystems yourself.
3. Dispute any errors you find: This holds true for both your ChexSystems score and your FICO score. You have enough to deal with from your own mistakes without having to also deal with someone else’s. Incorrect information on your Consumer Disclosure report should be disputed pronto. First, gather documentation that supports your case. Next, go to the Dispute section of the ChexSystems website. You can submit your dispute online, by fax, through the mail, or over the phone. ChexSystems will then investigate and typically resolve your claim within 30 days. You can also dispute the information directly with your creditor and ask that they update ChexSystems themselves or provide you with corrected documentation.

Taking the steps listed above might not be enough to get you off the blacklist. Still, it doesn’t hurt to make sure that all the information on your report is correct, that all your debts have been paid, and that you fully understand why your score is so low in the first place.

Apply for a “second chance” checking account.

Like we mentioned earlier, five years is a long time to wait before opening a checking account. In the meantime, it’s probably a good idea that you open up a “second chance” bank account, which is designed for people in your exact situation. Many banks offer these accounts, and you’d do well to check out your local credit union as well.

Because of the added risk that you present as a customer, second chance checking accounts usually carry monthly fees in order for you to use them. Additionally, they might come with some extra strings attached, like requiring direct deposit or a minimum balance. And some have fewer perks like online bill pay or debit cards.

Here’s the good news: Second chance checking accounts usually come with a graduation process whereby you can work your way up to a standard checking account. All you need to do is handle the account responsibly for a year or two--although the exact terms and conditions will vary from institution to institution.

Second chance checking accounts are far from perfect. But they most likely beat stuffing money in your mattress or putting it on a prepaid debit card. Just remember that no matter what banking option you choose, there’s only one surefire way to rebuild your banking history and get your ChexSystems score back up to snuff. You need to be responsible with your money.

What was that about credit scores?

For the most part, the same sorts of financial behaviors that keep you from getting flagged by ChexSystems will nurture your credit score. Paying your bills on time and not letting accounts fall into collections are always good ideas.

But there are certain additional activities you’ll have to keep in mind when trying to improve your credit score. Most importantly, you’ll need to build a credit history. The best way to do that is to get a credit card (or a secured credit card if you can’t qualify for a regular card) and use it responsibly month to month. Generally, responsible credit card use means charging no more than 30% of your debt limit each month and paying off that amount in full each time the bill comes around.

An important part of avoiding excess debt is building up an emergency fund that you can use to cover unforeseen expenses.

Having a bank account and access to credit are two very important foundations of a healthy financial life. That’s why keeping on ChexSystems’s good side and nurturing your credit score are so vital.