What is ChexSystems?

If you've ever been denied a bank account, it is likely because of negative actions in your ChexSystems report.

ChexSystems is a consumer reporting agency that collects information on the opening and closing of consumer checking, savings and other deposit accounts, including the reasons for the closures. It operates under the Fair Credit Reporting Act and works similarly to a credit agency.

CNBC Select breaks down how ChexSystems works and reviews some alternatives if you don't qualify for more traditional bank accounts.

Compare checking accounts

ChexSystems works similarly to a credit bureau. It collects a large amount of banking data and reports it to financial institutions so that they can assess the riskiness of a consumer before approving them for a new account.

Your risk level for owning a deposit account is translated into a ChexSystems Consumer Score (also called QualiFile score). Scores range from 100 to 899, with higher numbers meaning a lower risk profile and better approval odds. Viewing your Consumer Score requires an additional request form, and ultimately, might be less useful than the report itself as it doesn't show you the root of any potential issues.

However, it's important to note that not everyone has a ChexSystems report. For example, if you have a clean banking history or never had an account closed for a negative reason, your name is unlikely to be listed in ChexSytems.

If you have a clean banking history, you should have no trouble getting approved for most of the best checking and savings accounts, such as Citi® Access Checking, Discover Cashback Debit Checking and LendingClub LevelUp Savings.

A ChexSystems report could contain a wide variety of information relating to your banking history, such as:

• Number of accounts you've applied for recently
• Involuntary checking or saving account closures
• Unpaid negative balances and fees
• Bounced checks and overdrafts
• Suspected fraud or identity theft
• Who has viewed your ChexSystems report

ChexSystems focuses on forcibly closed checking and savings accounts, so it doesn't track active bank accounts or accounts you closed voluntarily with no history of mishandling. ChexSystems reports also don't include information like criminal records, employment history or rental history.

Information generally stays on your ChexSystems report for five years, but it may be removed sooner in special circumstances.

Compare savings accounts

There are three ways to request a copy of your ChexSystems report:

• By completing a form on ChexSystems' website
• By phone
• By mailing a Consumer Request for Disclosure Form

You are entitled to request a free copy of your ChexSystems report at least once every 12 months, and sometimes more often depending on your circumstances. If you believe any of the information in your report is inaccurate, you can file a dispute, either to the source of the inaccuracy or via ChexSystems who will reach out on your behalf.

It's good practice to regularly check your ChexSystems report as it can help you spot signs of fraud or identity theft. Alternatively, you can automate some of this with an identity theft protection service. One of CNBC Select's top-ranked identity theft protection services, Aura, offers protection against financial fraud and identity theft, as well as many other perks like credit monitoring.

Federal law requires banks or credit unions to tell you why you were denied a bank account. Generally, the reason you may be denied a bank account is due to negative information on your ChexSystems report.

If you are denied a bank account, ask the bank to reconsider your application and try to explain your situation better. If you were denied because of your ChexSystems report, requesting a copy of the report can help you identify specific areas of improvement and ensure there are no inaccuracies.

Cleaning up your ChexSystems report can take some time. As you fix your banking profile, you may want to consider a second-chance account. Second-chance accounts generally don't use ChexSystems reports when considering their applicants, which means you'll have a better chance of getting approved.

If you're having trouble getting approved for a traditional bank account and are searching for a second-chance checking account, consider Chime® Checking* or Chase Secure Banking℠*. The Chime account stands out for not having many common banking fees, while the Chase one is unique for offering a welcome bonus.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every banking article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of banking products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

Catch up on CNBC Select's in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.

*Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A., Members FDIC.

* Information about Chase Secure Banking℠ has been collected independently by CNBC Select and has not been reviewed or provided by the issuer of the card prior to publication.