Chexsystems can be compared to credit bureaus. In the U.S. there are 3 major credit bureaus that we are all familiar with. The actual official name for them is credit reporting agency. And they are Equifax, Experian (use to be TRW), and TransUnion. When ever a person applies for any form of credit from a lender, or business, a file on them is requested and purchased from the credit reporting agencies. This is all automated and completed in a matter of seconds nowadays. It is commonly referred to as “running a credit report” or “pulling a credit report” It often includes a number know as the credit score. The lender, or business, uses this information to help decide whether, or not, to extend the credit, and at what terms.
As you already know, and it is easy to see how, credit reporting agencies are very powerful institutions. All it takes is one bad item on your credit report and it can cripple your borrowing power for years. But what is even worse, and what most people don’t realize, is that more and more credit reports are being used by employers, landlords and insurance companies. This is why it is so important to make sure that your credit information is true and accurate.
A recent change to the federal Fair Credit Reporting Act (FCRA) requires each of three major credit reporting agencies provide a free copy of their credit report, at your request, once every 12 months.
ChexSystems is sort of like a credit reporting agency for the banks and credit unions
In fact the federal government requires Chexsystems to follow the exact same regulations, and rules, as Equifax, Experian, and Trans Union. They maintain a database that keeps track of negative information regarding checking and savings accounts. Banks report to Chexsystems the names of people who they feel have mishandled an account.
When someone attempts to open a checking account. banks who are members of Chexsystems, will run a check on the new perspective customer to see if that individual has had: frequent account overdrafts… bounce checks… did something banks consider as an “act of fraud” or otherwise have an unpaid balance owed to another bank on a closed account.
Just like with the credit reporting agencies you can request your chexsystems report for free under the FCRA.