There are multiple credit screening systems for potential consumer banking customers, but the most common is ChexSystems. If you’re looking to avoid this screening system, look for an online business checking account that doesn’t use ChexSystems. These accounts allow you to open a new checking account, despite any previous negative banking activity.
What Is ChexSystems?
ChexSystems is a reporting agency banks use to collect consumer banking information that indicates previous negative or bad banking activity. Other banking reporting agencies like Early Warning System (EWS) and TeleCheck also create customer files regarding banking history, but ChexSystems is the most widely used.
Financial institutions rely heavily on ChexSystems to screen potential banking customers. Customers will only show up in ChexSystems when a bank or merchant has reported them for negative banking activity, including bounced checks, insufficient funds, and involuntarily closed bank accounts.
Because ChexSystems is a consumer-based system, it doesn’t keep information on incorporated businesses. However, because sole proprietors use their Social Security numbers to open business bank accounts, including business checking accounts, they can be reported to ChexSystems.
Banks That Don’t Use ChexSystems
Although most banks use ChexSystems to screen new bank customers, there are a few institutions that do not. It’s important to note that even if a financial institution does not use ChexSystems, they may use other methods like EWS, TeleCheck, or pull your credit report.
With BBVA, you won’t need to worry about a denial based on a ChexSystems report. This bank offers full-service business banking complete with online and mobile services. With its Business Connect Checking account, you’ll get free cash processing, up to $5,000 per month. Plus, it has no monthly fee and no minimum balance requirement. However, you will need $100 for the opening deposit.
Business owners can easily open a sole proprietor account online. However, you must reside in Alabama, Arizona, California, Colorado, Florida, New Mexico, or Texas to open an account.
SunTrust Bank is another regional bank that’s great for business owners in Alabama, Arkansas, Georgia, North Carolina, Arkansas, Florida, Maryland, Mississippi, Tennessee, Virginia, or Washington, D.C. Because this bank doesn’t use ChexSystems to screen its applicants, you’re more likely to get approved for an account even if you’re on ChexSystems.
Although SunTrust is a full-service bank, you’ll have access to multiple branch locations, ATMs, and online and mobile banking. What makes the Simple Business Checking account a nice option is the $5 monthly fee that’s automatically waived for the first 12 statement cycles. Additionally, you can open all of this bank’s business checking accounts with no deposit.
Renasant Bank is a solid option for business owners in Alabama, Florida, Georgia, Mississippi, and Tennessee. This bank doesn’t use ChexSystems to screen applicants, so previous ChexSystems history won’t prevent you from opening a business account.
This bank offers its basic business checking account free of minimum balances and monthly service charges. Plus, you’ll only need $50 for the opening deposit. However, you won’t be able to open an account online, so you’ll need to visit a local branch.
Woodforest National Bank
Woodforest National Bank offers the Second Chance Business Checking available for business owners with previous credit issues, making it easier to get approved for a bank account. This account has a monthly fee of $15, so it’s not exactly low cost. However, the opening deposit is reasonable, considering it’s only $100.
This account is only a viable option for anyone living in Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia. You’ll need to visit a branch location to open an account.
Local Banks and Credit Unions
Apart from regional banks, it’s also good to consider local banks and credit unions. Smaller institutions and credit unions may be willing to take on slightly more risk with potential customers than larger institutions. Sometimes, it’s easier for smaller institutions to make exceptions for past credit issues based on your circumstances.
Some credit unions like Navy Federal Credit Union also offer business checking accounts without a ChexSystems credit check. Business owners looking to re-establish banking history will have an easier time with this credit union. But like most credit unions, you’ll need to apply for and meet the membership qualifications like residence, organization association, or employer.
How to Recover from a Negative ChexSystems Report
Items that will appear in a ChexSystems report include insufficient funds, unpaid overdraft balances, returned checks, and fraud. Most banks will refuse to open an account in your name if your ChexSystems has negative items. But the good news is, if you do have a not-so-good ChexSystems file, there’s a three-step process you can follow to recover.
1. Review Your ChexSystems Report
One of the most important things to do when you have a negative ChexSystems report is to view your file. If you’ve been denied a bank account before, you likely received a letter from the reporting agency. You can use this information to confirm you’re in ChexSystems and view a free copy of your report. Because of the Fair and Accurate Credit Transactions Act (FACTA), you’re entitled to a free copy of your report every 12 months. You can view your ChexSystems consumer report online instantly.
2. Clear Any ChexSystems Items Under your Name
Once you’ve viewed your ChexSystems file, it’s time to work on clearing it up. Much like your consumer credit report, there may be inaccurate information listed. If you have unpaid bank account debt, you’ll need to contact the reporting financial institution to resolve the debt. Although the bank isn’t required to delete the item from your report, it will report the item as paid.
Your ChexSystems file will display the previous unpaid bank account balances, bounced checks, and closed accounts due to overdraft or fraudulent activity. If any of this information is inaccurate, you’ll need to file a ChexSystems dispute. ChexSystems will investigate and give you a resolution in 30 days.
Did you know?
ChexSystems reports contain banking activity as well as returned check activity from the previous five years. Items older than five years won’t appear on your file.
3. Manage Your Deposit Account Responsibly
Properly managing your bank accounts is the most important part of keeping healthy personal and business finances. When you prevent negative banking activity, such as returned checks and overdrawn accounts, you’ll have no issue opening any account in the future. If you’ve struggled with your banking activity in the past, there are a few things you can do to stay on track:
- Monitor your account: Use online banking to view daily activity and balances and track your spending easily. This keeps you aware of your balances so that you don’t use more funds than what is available in your checking account.
- Keep a minimum balance: Additional account funds can act as a buffer, helping you avoid overdraft fees if you have a returned deposit, unexpected charges, or if you accidentally overspend.
- Pay overdraft balances immediately: In the event that your account becomes overdrawn, it’s important to pay the entire balance immediately. Overdraft balances won’t affect your ChexSystems report unless the account is closed, and the balance remains unpaid.
Tip: Help safeguard your account against unexpected overdrafts by receiving electronic deposits in place of check deposits. Because senders must have available funds to complete an electronic transaction, you won’t have to worry about the deposit returning as insufficient later. If you do deposit a check, it’s a good practice not to use the funds until the check has cleared the issuing bank, usually one to three business days.
Frequently Asked Questions (FAQs)
I discussed quite a bit of information on business checking and ChexSystems. However, there are usually a few commonly asked questions on this topic, so we’ll discuss those here. If you have a question or comment you’d like to add, please feel free to leave it in the comment section below.
Can you open a business account if you’re in ChexSystems?
Some banks like BBVA have been known not to use ChexSystems to screen banking applicants, making it easier to open a business account while in ChexSystems. However, banks that use ChexSystems, including Bank of America and Chase, may still run your personal information through ChexSystems before approving a business account, even if your business is incorporated.
Does ChexSystems go on your credit?
Your ChexSystems report is separate from your credit report, and ChexSystems does not report to the credit bureaus. Instead, information on your credit report is reported by creditors, lenders, and banking institutions directly.
How do you know if you’re on ChexSystems?
Many people become aware that they’re in ChexSystems after being denied for a bank account. If you’re denied a banking membership or deposit account, the bank will notify you if the decision was based on a ChexSystems report. However, you can visit the ChexSystems website to see what’s on your report for free once every 12 months.
It’s not easy to find a bank that will offer you a banking relationship if you’ve had issues in the past five years. Everyone makes mistakes, and if you’re a business owner, you have the right to start again. With banks like BBVA, SunTrust, and smaller local banks that don’t use ChexSystems, you get a second chance at the banking relationship your business needs.