Banking, ChexSystems,
July 26, 2020

Your Comprehensive Guide to Understanding ChexSystems Scores

Gregory Weiss
Your Comprehensive Guide to Understanding ChexSystems Scores

If you are looking to open a checking account and are facing problems when doing so, there may be a myriad of reasons for the trouble. When facing this trouble, it is best to remain level-headed and ask the concerned bank why they have denied your application. A specific reason can help you take action and find a solution that can fix the problem.

One particular reason, which may be causing you the problem, is your ChexSystems score. ChexSystems is a Consumer Reporting Agency used by most banks across America to screen new customers. It allows banks to review a customer’s history with other banking accounts.

Being in ChexSystems means you have a ChexSystems Consumer score. This score is a numerical value that represents the amount of risk ChexSystems has associated with you. Banks can use this score to determine whether or not a customer is eligible for a checking account. For some banks, even having a high ChexSystems score can be a cause of concern and such an applicant can be denied a checking account.

What is a ChexSystems Score?

Your ChexSystems Consumer Score is the score ChexSystems gives you to determine the amount of risk you pose for a bank with regards to your past banking mistakes, including any overdrafts, fraudulent activities, etc. This score can range anywhere between 100 and 899. The lower your score is, the greater the risk you pose and vice versa.

Your score is used by most banks to determine how responsible you are with money. It can be troublesome to have a record at ChexSystems in the first place.

However, you should also remember that this score is not the only one used by the bank to make a decision and there are other reasons (maybe even in combination with your score) for rejecting your application.

How is a ChexSystems Score Different from a Credit Score?

While a ChexSystems score is determined with the use of your checking account history, a credit score is quite different. A credit score is calculated using your credit reports and one person can have multiple credit scores at once. Credit scores usually range from 300 to 850 and the higher your score the better. Also, banks usually do not look at your credit score when deciding whether or not they should allow you to open a checking account with them.

Thus, credit scores and a ChexSystems score are generally not linked together. It is possible to have a bad ChexSystems score but a bad credit score and vice versa.

How to Check your ChexSystems Score?

Anyone wanting to check their ChexSystems score can simply request access to their ChexSystems report using the ChexSystems website. The report they provide is free of cost and would give you an idea of why you’ve been evaluated to pose a risk. Your request form should be emailed or mailed to the address listed on the website and it should be filled according to the requirements mentioned. If you want to see what the ChexSystems report looks like, you can find a sample report on their website as well.

A Good ChexSystems Consumer Score

While ChexSystems does not provide access to the formula they use to calculate your score, it is useful to know what is classified as a good score. Thus, there is no exact “cut-off” point for ChexSystems scores. However, most bankers have stated that having a score above 580 means you are safe. It is best to remember that the higher your score, the safer you are.

How Is a Score Calculated?

When calculating a score, information from the following sources is taken into consideration:

  • Your ChexSystems consumer report
  • Data from the ChexSystems Debit Bureau
  • Payday loan history
  • Your occupational history
  • Your public records
  • Your Equifax, Experian and Transunion credit reports.

It is important to note that having multiple sources does not mean your score will be completely accurate and that is why you should review your score and report as thoroughly as you can.

Not Everyone Has a ChexSystems Score

People who have always practiced ideal banking habits and have followed the rules usually do not have ChexSystems scores. This is because there is no negative information on record for ChexSystems to calculate an actual score. Thus, adopting good banking habits is an essential part of avoiding a bad ChexSystems score.

How are ChexSystems Scores used by Banks?

ChexSystems has a consumer classification system that provides banks with cut-off segments. Consumer scores are placed into this classification system to determine how much risk is associated with the consumer.

Consumers who have a score from 580 to 899 come under the averse category and they are known to pose the least amount of risk. Consumers with a score from 545 to 579 are classified in the moderate risk level. Consumers with the greatest risk have a score of 55 to 544 and are classified as aggressive. Any score less than 544 means that the consumer will be denied a checking account.

There are other scores that you may find on a ChexSystems report. 9998 is often seen and indicates that the owner of the associated Social Security Number is deceased (however, if that is not the case, contact ChexSystems and inform them) and 9999 is used to indicate that there is an insufficient amount of data to generate a score for the consumer.

Hence, ChexSystems scores are an essential tool used by banks to ascertain who to avoid conducting business with.

Improving your ChexSystems Score

All hope is not lost, there is room to improve your ChexSystems score and you can do so by:

  • Keeping track of the time it takes deposits to be credited to your account.
  • Checking your balance before you make any payments.
  • Before closing a checking account, ensuring that all of your checks have been cleared and any fees have been paid.
  • Apply for a free report of your score from ChexSystems on a yearly basis and review the report once you receive it.
  • Pay off your debts and if that is not feasible for you, ask your creditors if they can settle for a reasonable amount that is affordable for you.
  • Once you have paid off your debt, request ChexSystems to remove the information from your record.
  • Strengthen your relationship with your bank and when you find out you cannot make a payment on time, inform them.

If you have reached desperation, wait for your record to expire from the ChexSystems database. This generally takes 5 years and you should avoid any behavior that may add to your record until then.

Can ChexSystems Scores be Inaccurate?

Your ChexSystems score is calculated using a plethora of sources and if the financial details provided by those sources are incorrect, your score may be inaccurate. When reviewing your ChexSystems score, look for inaccuracies in the details of non-sufficient funds, returned checks, account abuse and closures, suspected fraud, unrecognizable bank accounts, and hard inquiries.

If you find your score to be inaccurate, you have a right to point this out and take action. A dispute takes 30 days to be investigated and the results are usually sent through a letter.

However, if your information is up to date, it is unlikely that the provided ChexSystems score is inaccurate.

Alternative Solutions

If you need a way to manage your money but are denied a new checking account, you can:

  • Open a second chance bank account, which is one of the best alternatives out there, and would come with some requirements you would have to meet.
  • Get a prepaid card, which allows you a convenient way to hold and manage your money and function similarly to a debit card.
  • Use money orders, which may not be as desirable or easy to use as the above-mentioned options, but can work, as a last resort.
  • Simply use cash (which is, admittedly, very inconvenient in the modern era of electronic money, but will work nonetheless).

Try using these tactics until you can improve your ChexSystems score or until your record is replenished, whichever comes first.

How is a ChexSystems Score Different from a Report?

Many people think that their ChexSystems report will contain their scores. However, this is an incorrect assumption. While your report will consist of the details that were used to calculate your score, it will not contain your score. However, you can send a request to see your score. Your score is the main source that banks use to determine your eligibility, while your report is simply an elaboration of your score and a summary of your financial activities.

How to Avoid a Bad ChexSystems Score

A bad or high ChexSystems Consumer score can be easily avoided, especially if you do not have any prior record. The following are ways to avoid it:

  • You should monitor your account closely to ensure that you do not go in the red.
  • When spending money, make sure to spend only that much that you know you can cover and do not overspend.
  • Pay overdraft and non-sufficient fund fees as soon as possible.
  • Before closing an account, clear all transactions.

Ensuring that you develop these good banking habits and monitor your finances closely can help you avoid a bad score, which will keep your ChexSystems record clear of any negative activity.

Not all Banks Use ChexSystems

Only 80% of American banks use ChexSystems when granting customers checking accounts. Often, these banks are rather large, well-known institutions that entertain multiple applications on a daily basis. ChexSystems provides them with clear cut criteria for ensuring that those given checking accounts are as responsible as possible. However, many smaller and local banks do not take ChexSystems scores into consideration as their frequency of checking account applicants is much less than larger institutions.

See More: Banks that don't use ChexSystems

There are also some large banks that take ChexSystems scores with a grain of salt and grant applicants leniency and this makes it easier for applicants to access checking account facilities. It is always helpful to ask banks for their policies concerning ChexSystems scores.

Other Important Facts to Remember

It is important to remember that ChexSystems is not the only system used to account for your checking activity as many banks rely on other systems. Thus, it is crucial to ask your bank for this information in order to ensure that you know the correct place to request your report and score.

Also, once you are in the system, you can get out. It is not that difficult, but it will require some hard work and plenty of monitoring of your financial situation. Asking for expert opinions often helps. Whenever you find yourself in such a situation, simply weigh the pros and cons of all of the possible routes you can take and find the best solution suited to you.

Conclusion

Many people become extremely tense and flustered when they are denied a checking account, but it helps to remember that you are not the first person with whom this has happened. There is plenty of literature on the topic of ChexSystems and there are many routes you can take if you find yourself with a high ChexSystems score. All you need to do is to turn to the internet for all of the information and get the help you need with regards to your score and report.

Your ChexSystems score is nothing for you to worry about as long as you take swift and logical action to improve it. Taking the right set of actions at the right time can greatly help to set things in motion for you and show your bank and creditors that you are making an effort. Also, keep in mind that even if you do nothing and simply decide to wait it out and use cash in the meantime, you can still benefit.

There is always a solution, though all you have to do is see one!

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