How Does ChexSystems Work?

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What is ChexSystems?

ChexSystems is a database used by more than 80% of banks within the United States. Financial institutions associated with ChexSystems runs a search on potential customers to see if their name appears in the system. If the potential customer's name is found, it will either send a "No records found--Approve" message, or "Records found--Decline" message. Further details as to why records were found (e.g. account closed due to unpaid overdrafts) will likely be provided by the applicant, showing the account has been paid.

How Does ChexSystems Work?

When a person attempts to open a savings or checking account at a bank or credit union that uses ChexSystems, that financial institution checks to see if the potential customer is found in the ChexSystems database. If the account applicant has had fraudulent charges, unpaid overdrafts, closed accounts or, opened an account using false information, they will likely be found in ChexSystems. The database also alerts associated financial institutions when an applicant provides a counterfeit Social Security number.

The Effects of ChexSystems

ChexSystems is used not only by the banking industry, but also by grocers and other retailers. Once a report is made, it remains on file for five years and affect your future banking abilities. However, the decision to accept or decline a potential customer still belongs to the new accounts officer or manager, not ChexSystems. ChexSystems only provides the necessary means for banks, credit unions and other businesses to better protect themselves against losses, due to fraud, carelessness and unscrupulous consumers.

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