Most of us are familiar with the three main credit bureaus and we know that not paying a credit card or loan will cause negative information to end up on our credit report. Did you know that mismanaging your checking or savings account could negatively affect your banking options? Checking and savings account activity does not appear on your credit report, but most financial institutions report misconduct to a database called ChexSystems. Types of activity that may be reported to ChexSystems include:
- Having your account closed involuntarily by the financial institution.
- Bouncing checks. Financial institutions will typically only report people who fail to pay the non-sufficient fund fees and/or bounce checks habitually, not those that do it once by mistake.
- Overdrawing your account. Being in the red a day or two before depositing funds will not generally get you reported to ChexSystems, but if you fail to add money after a reasonable period of time or you repeatedly overdraw, the chances are good that you will be reported.
- Committing an act of fraud, such as altering checks or providing false information about your identity.
- Applying for a checking account, ordering checks, or reporting a check or debit card lost or stolen. Most of the time, these activities are perfectly legitimate and will not be held against you, but they can be a sign of fraudulent activity, which is why financial institutions may report them to ChexSystems.
Information can stay on your ChexSystems report for five years. If you owe an outstanding debt, paying it does not get it removed from your report early (unless the financial institution voluntarily deletes it), although your report will show that it was paid.
Positive information is generally not reported to ChexSystems. If you have never had any incidents of mismanagement, you probably do not have a ChexSystems report.