Most banks use the ChexSystems in order to determine the level of risk for a client who wants to open a new banking account. The system is a considered an eFunds check verification service. When a client goes to open a new account, the bank representative will take the information of the client (social security number) and run their consumer credit report from the three main agencies; TransUnion, Experian and Equifax. Most bank accounts do not go directly off of credit scores when determining if they should approve a client’s application. In fact, most banks threw away this method after the recession (since most people have bad credit), it wouldn’t make the banks any money to discriminate in this matter. Instead, they check to see if clients owe any money with other banks (most of the time, default bank accounts were caused by overdraft fees which were not paid off in a timely fashion).

Over 80% of banks all over the world use the ChexSystems in order to accept or decline a client’s savings account application. (The same thing goes for other types of bank accounts such as Checkings and Student accounts). The other 20% are FDIC assured, but do not use the system to determine elgibility for a new account. This small minority of banks usually rely on other financial information. An average of 9,000 banks use the system with over 100,000 private branches also using it.

The system also offers their own products and services such as; Fraud Finder, ProspectChex and Transaction Monitoring. Some of the other things that banks look for in the system check when opening new accounts is banking irregularities, overdraft fees, fraudulent checks and unsatisfied balances. When this shows up on the background check, the bank representative will deny the client a new bank account. The consumer reporting agency is governed by the Fair Credit Reporting Act. Consumers have the right and the ability to receive a free system check report each year. They can also dispute items on their report, which is a good idea since the amount of identity theft has increased over the past couple of years.

Some people criticize the bank system check as being unethical and participating in unfair reporting practices. This is because the bank system check does not report the positives of the client’s bank account history; only the negative. It also does not provide the bank or the consumer with a risk analysis score such as with a FICO score (or credit score). Because of this, millions of people have been denied new bank accounts.

Some banks have been responding to the negative criticism by not using the bank system check for opening new accounts. Instead of using the system, the staff is being trained to make their own judgment and setting minimum limits to activating the system. Bank reps are also being trained to override the denial of a new bank account to a customer based on unfortunate circumstances out of their control, such as illness and job loss.

Now as a final note, there are some solutions if you can’t get a bank account because your name is in ChexSystems databases.

1. Find a bank that doesn’t use ChexSystems
2. Get a Second Chance Internet Bank Account
3. Use a special Prepaid Visa Card that functions just like a bank account
4. Wait 5 years.

So lets discussion these one by one.

Option 1: There are some banks that don’t use ChexSystems, but it’s hard to find them. The best way is to look at all your local banks and give them a phone call asking if they use ChexSystems. You can, in fact, only obtain this information on the phone.

Option 2: A second chance checking account is another option. These accounts are internet bank accounts but really function just like a regular account. The cost is literally the cost — you will pay a lot more for one of these bank accounts.

Option 3: One very popular option these days is the use a special prepaid Visa card that works just like a bank account. You basically deposit money onto the card. Once there is money on the card, you can use it wherever you might use a normal visa card. You can make payments and deposits online. The big difference between one of these Visa cards and a normal visa card is you can’t have a negative balance on the card — so don’t think of it as a “credit card” but as a bank account with no overdraft!

Option 4: The final solution is to simply wait five years for your name to be removed from the ChexSystems list. This is not a very appealing choice for most people, since you pretty much need to have a bank account these days to function in modern society.

So if you can’t get a bank account because of ChexSystems, there are some real solutions out there. Non of them are as good as having a regular bank account, but some of them will do a good job as a substitute until you can get your name off ChexSystems.