If you've recently opened a checking account and you haven't had any trouble, you probably haven't heard of Chexsystems yet. However, if you should try to open a bank account at some point and your bank won't let you, it might be because of Chexsystems.

The parent company of Chexsystems is eFunds - created in 1999 to serve the financial lending services sector. Its specific mission is to detect fraudulent activity and help financial institutions in their risk management analysis, particularly for their individual customers.

Basically, it keeps track of and then reports on your banking activities similar to what your credit report and score does for you in terms of measuring how you are as a credit risk and in paying bills on time. Chexsystems keeps a sharp eye out for suspicious banking activity, overdrafts, insufficient funds check cashing, or an inability to meet minimum balance account requirements.

In this way, Chexsystems provides two services. It verifies your checking activity and functions as a consumer credit reporting agency similar to TransUnion or Equifax. Just as you can ask for one credit report every year, you can also ask for a Chexsystems report once a year, also free of charge. This is because, like the credit reporting agencies, it is also covered by the Fair Credit Reporting Act.

This means that if you are a consumer, you can question any information Chexsystems contains, including the ability to dispute entries. Most banks and credit unions in the United States use Chexsystems. If there's any negative reporting on a particular client, that person may have trouble opening a checking account. Is Chexsystems fair? Some critics have objected to their reporting practices, saying that the system does not report fairly, and unlike credit bureaus with both positive and negative information, critics say that Chexsystems only contains negative information, so that this jeopardizes consumers' reputations who would otherwise be qualified to open checking accounts.

Because of this increase in criticism, in 2000, several banks got together and agreed to reconsider policies that affected checking account applications based on reports by Chexsystems. Some reforms were put through, including ignoring entries that are more than three years old, where those entries don't contain fraudulent activity. The reforms also disregard entries that are greater than one year old, as long as the consumer has settled the debt in question.

What's in a Chexsystems report? As an example, a sample report shows just how thorough this type of report is. The person's name and address appear at the top of his or her report, along with Social Security and ID numbers. If you should ever need to write Chexsystems about anything that appears in your report, you should include your Social Security number and ID number in your correspondence.

The first thing you read on the document is that Chexsystems will look into any information or entry that you believe is incorrect or inaccurate. You can send your inquiry to fax number 602-659-2197.

After this is the "Reported Information" box. Most of this information comes from financial institutions. It is recorded in Chexsystems for five years. If there is more than one reported transaction or piece of information, items are itemized. Each item details source of the reported information, and the individual in question being reported on, including Social Security number, driver's license number, as well as the type of report done, such as non-sufficient fund's report.

Following this is another box that reads, "Inquiries initiated by Consumer Action." This means transactions that you initiate yourself. It shows your applications for a credit card or applications you made it a financial institution or bank. This information is kept on the report for up to three years.

The third section of the report is on "Inquiries not Initiated by Consumer Action." This means that other people have asked about you. These people could be your current loan holders or credit card companies, pre-approval creditors, or anyone else trying to assess your credit.

Finally, there's one more box that says "retail Information," which includes checks issued to stores and other retailers that have been returned. When a store receives a check that they can't cash because there are non-sufficient funds, for example, this information is shared with the company called "Shared Check Authorization Network" or SCAN for short. It keeps a database of fraudulent activity and checks that have been returned. In order to obtain information for check authorization and verification, retailers must be SCAN members. This information is used by Chexsystems, but Chexsystems does not become involved in collecting returned checks.

If you've ordered any checks, this is also recorded in your Chexsystems report and it provides a history of your check orders. The next two boxes are validation activities for your driver's licence and social security number. Your driver's licence goes through two processes: validation and verification. Chexsystems validates your driver's licence by matching your licence format with the state-approved format; verification involves confirming your name and place of birth.

So before you write out a check, think of Chexsystems and make sure that you have enough money in the bank to cover the check, that it is your check and not someone else's, and that perhaps it's a better idea to pay for merchandise with cash or a credit card!

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Steven J. Talrechi has been providing information on second chance checking for over 10 years now. Before you sign up for a second chance checking account, please come to our site for all the most current information.