If you pass a bad check and don't pay it back or your bank closes your account due to unpaid negative balances, the bank can report you to Chexsystems. Chexsystems keeps records of bad check writers for five years. Banks usually search the Chexsystems database when a consumer attempts to open a new account and may deny an account to persons who are on the database.
If a bank reports you to Chexsystems for having engaged in fraudulent activity such as passing bad checks or overdrawing your account and never paying the money back, your name remains on Chexsystems for the next five years, even if you resolve the problem during that period of time. 80 percent of banks use Chexsystems to verify customers' credit when they attempt to open a new account so you may have a hard time opening an account once your name has been placed in this database.
If you pay the account, the bank that reported you must report to Chexsystems that you paid the account in full. Chexsystems usually will not remove the report, but it will update the report to indicate that you paid back the money that you owed. Banks may take this information into account when deciding whether to allow you to open a new checking account despite being on Chexsystems.
If the bank that reported you to Chexsystems requests that the report be removed, Chexsystems may remove it prior to the end of the five year period. The reporting bank must request the removal, not the consumer who the report refers to. Sometimes banks will do this as part of a settlement agreement if you pay them back in a timely manner, although most banks just report that the debt was repaid.
Checking Your Report
You have the right to check your Chexsystems report once every 12 months. You can request the report through Chexsystems' website. Chexsystems reserves the right to store your personal information and may share this information with law enforcement services if warranted. For example, if you have passed several bad checks and not paid them back, then moved to hide from your creditors, Chexsystems can notify law enforcement of your whereabouts.
Jack Ori has been a writer since 2009. He has worked with clients in the legal, financial and nonprofit industries, as well as contributed self-help articles to various publications.