If applying for a credit card or a loan with a low credit score, you might mentally prepare yourself for a rejection. Most consumers are familiar with credit bureaus, such as Equifax and Experian, and they know that creditors reference these bureaus to determine creditworthiness. But unknown to many, banks have their own type of credit bureau.
ChexSystems is a credit reporting agency for banks and it keeps a record of how consumers handle their deposit accounts. While ChexSystems isn’t new, many consumers are unaware of this service. In fact, many people don’t learn about the agency until they’re denied a bank account. Overdrawing your checking account or bouncing a check and never repaying your bank may prompt the institution to report your actions. Negative remarks can remain on your report for up to five years and prevent the opening of a new bank account.
But you don’t have to wait five years to get your finances in order. There are several steps you can take to fix your ChexSystems file and open a checking or savings account.
- Order a copy of your free report. Like credit reports, you can obtain a free copy of your ChexSystems report every 12 months. Visit www.consumerdebit.com. The information in your report will name the bank or credit union that reported you, as well as provide clues as to why you can’t open a bank account.
- Contact the reporting bank or credit union. After discovering the name of the reporting bank or credit union, call the bank immediately to resolve the situation. There’s a chance that the bank reported your name and account in error, in which you can bring this information to the bank’s attention. If the financial institution is unwilling to help, you can file a dispute with ChexSystems and the agency will investigate your claim. If you owe the reporting bank, paying what you owe is the only way to remove your name from the system.
- Provide a letter of explanation. But even after paying back your bank or credit union, the financial institution may refuse to remove your name from ChexSystems. If this happens, write the agency and explain that you paid the money owed to your bank or credit union. Ask the agency to include the letter with your file, which essentially provides your side of the story. With a letter on your file, other banks will see that you resolved the matter, and this could open the door to a bank account.
If you cannot pay back your bank and you remain in the agency’s file, you may qualify for a bank account offered by your school or employer. These accounts are sometimes available regardless of your banking history. But if this isn’t an option, propose a plan that lets you repay your bank in small monthly increments. In the meantime, use a re-loadable prepaid debit card for everyday purchases. Deposit cash or your paycheck directly onto the debit card, and use the card wherever Visa or MasterCard is accepted.
This article was first published on http://moneyprime.com.