If you recently attempted to sign up for a checking account only to discover the bank will not lend to you, you are probably wondering what led to your denied checking account application. Many people do not realize it, but banks on both the local and national level use a system to determine whether or not potential applicants will be more likely to write hot checks. This system is called ChexSystems and most banks across the nation employ it to determine your eligibility.
When you apply for a checking account, the bank asks for your social security number so that it can check ChexSystems to see if you have any reports within the system. If you previous opened a checking account and you have a negative balance with a bank that uses ChexSystems, chances are your hope of opening a checking account with another ChexSystems bank while this balance is in the negative is impossible.
The downside of having your name placed within the ChexSystems database is that even if you make things right with the bank by paying off your negative balance, your name will stay on the system for up to five years, unless the bank that reported you specifically asks the system to expunge your name. While it is required that the bank update your status in ChexSystems as having paid off your balance, they are not required to have your name removed, so the blemish of having been reported to ChexSystems can remain for up to five years.
For online banks, denied checking account status is a little bit different. Many banks rely on your credit score, meaning if you have debt problems with anything below 600, you will often be denied a checking account with that service as well. For this reason, it is recommended to maintain good financial health by keeping your credit score up and staying out of the negative balance with your current bank.