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Small businesses have a lot of choices when it comes to banking. Here are some of the benefits and drawbacks of choosing to do your business banking with Capital One.
Ever heard of ChexSystems? If you haven’t, you’re not alone. While the name may not ring any bells, chances are you have a long history of doing business with banks for which ChexSystems is an integral part of operations. Moreover, ChexSystems actually plays a critical role in your business credit itself. But now we’re getting ahead of ourselves — let’s have a proper introduction first.
At its most basic level, ChexSystems is a check verification service and consumer credit reporting agency that provides details about consumer deposit accounts to banking institutions. So, thanks to ChexSystems, banks have thorough reports on your account history, which is data that may guide their banking decisions with you.
Before we delve too deeply into the relationship between which banks use ChexSystems and its impact on your business credit, we’ll discuss some more information that you need to know to truly understand how ChexSystems functions.
As we mentioned, ChexSystems is primarily a consumer reporting agency, albeit one with a national reach which falls distinctly under the jurisdiction of the Fair Credit Reporting Act (FCRA). Equipped with data regarding closed checking and savings accounts, the company contributes these details to a clientele comprised of banks, financial institutions and other companies with clearance to receive it (again under the FCRA). For the most part, this data’s intended use is to allow clients to more accurately perform risk assessments regarding potential new accounts coming their way.
Perhaps because ChexSystems is so deeply entrenched in presenting sensitive data to banks and other financial organizations, some entities have emerged that pose as affiliates of the company. It’s sensible that consumers may want unpleasant data cleared from their records (more on that in a moment), but any group claiming an ability to clear your file — for a fee, of course — is, in reality, unconnected from ChexSystems and should be avoided. This is not how the company functions: its business lies directly with banks, not reaching out to consumers. Don’t fall prey to some scam looking to tap into your ChexSystems history.
Although ChexSystems does indeed report your financial history to banks with which you’ve applied for an account, the company will never seek to collect fees from you for any reason, nor make any unsolicited calls to individual consumers. In some cases, you may wish to work with ChexSystems yourself to sanitize your record, but this scenario is a bit more complicated than you might be hoping for (we’ll get to that shortly). For now, let’s look at the relationship between banks and ChexSystems itself. After all, this is the most fundamental part of the company’s operation.
ChexSystems’ main function is to protect banks from getting into business with consumers who carry a bad banking history, including check cashing, fraud, unpaid fees and closed accounts. This service is certainly beneficial to financial institutions looking for a straightforward way to screen existing and prospective customers.
But this system can spell trouble for consumers who are saddled with the aforementioned financial baggage, especially since they’ll only be included on the list when they have a negative record. Making matters even worse is the fact that the vast majority of banks use ChexSystems, creating a much smaller pool of banking options for some consumers.
Although you do have some options for removing your record from ChexSystems, your best bet for now is to look elsewhere to open an account. However, identifying which banks opt out of using the ChexSystems database is difficult, since much of the data you’ll find may have changed since it was posted. Moreover, banks don’t often divulge the backend systems they use to onboard new account applicants, citing security reasons.
Thankfully, if you can nail down the information, you’ll discover that several high-profile banks don’t use ChexSystems at all. You might also want to look into local or state banks, credit unions or even online lenders that may or may not use ChexSystems. This list is subject to change, of course, but for now, here are 10 major banks that say “no” to ChexSystems:
This is by no means an exhaustive list, but with a balance of larger financial institutions and smaller banks, the above does give you a representative idea of the cross-section of organizations that have decided not to use ChexSystems to screen new accounts.
If you find yourself routinely rejected for a new bank account, there’s a good chance you have something in your financial history that has landed you on the ChexSystems database. But don’t worry — you can find your way off of it. You’ll need a proactive attitude and a bit of time to sort out the obstacle that could be standing between you and your new account. Here’s what you need to do:
Do you still have questions about ChexSystems? Let us know on Twitter @Revenued_com!
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