ChexSystems creates a database of information for banks to determine whether customer has bad financial records or not. It’s legally empowered by the Fair Credit Reporting Act.
ChexSystems reports are similar to credit reports, insofar as they record financial history of a certain individual, however, credit reports they differ insofar as the records are just negative remarks, unlike credit reports provide both the positive and the negative remarks whereas ChexSystems just record negative remarks.
The negative remarks include but not limited to the following: unpaid loan balances, fraudulent acts, lost debit/credit cards/passbook, and unfunded checks. Banks with such systems have the capacity to filter applicants.
There are very few banks that don’t use ChexSystem. That is why it is difficult to find another bank that admits second chance accounts. Considering that you may be allowed, there are limitations such as you can’t open a checking account. Hence, this is how detrimental it will be for you. However, if you are in business, this may be beneficial to you.
How does it work with business?
One of the important things to consider in running a business enterprise is having a bank that you can trust. More importantly if a bank can guarantee the safety and security of the money entrusted to them. With ChexSystem, banks can guarantee security that they don’t just accept applicants with bad records. This is helpful in business because business owners are also engaging in loans made by customers as a means of purchasing. Most customers, who belong to the middle class, tend to purchase using debit or credit cards. They will buy items for a certain amount of downpayment and pay the next in terms. However, there are some customers, who would just buy and would never mind paying. It could be worse if the same customer will purchase again, you have no way to filter them out.
In doing so, financial stability is protect in order to maintain the bloodline of a business venture.
Furthermore, business owners can maximize the ChexSystems in terms of safety and security with ChexSystems. Through this, there can be a way to accommodate customers and assign them in payment terms based on their records. In other words, you can avoid the risk of giving high loans to non-pre-qualified customers and prioritize those who are capable of that. In doing this, you may able to make good sales.
Aside from safety and security, business owners must be prepared by having buffer funds sourced from savings or establishing open communications with banks that may lend money eventually. In other words, it cannot be avoided that you may obtain some credit or loans. By doing so, you can maintain good standing by keeping your credit report with good remarks and high credit rating. Through this, it will give a good name for your business which can assist you in getting more loans or opening checking accounts in other banks. Thus, it may help your business to operate smoothly and making your financial situation more predictable.
ChexSystems may be stringent and could be negative for the usual bank customers. But in business, you may take advantage of it. You may improve your credit standing by constantly monitoring your financial history and be able to gain from the safety and security features. However, in order to get rid of the risk, you must be financially responsible by regularly monitoring your records and be able to maintain good standing. Always remember, cash flow is the bloodline of business. After all, security is your top priority. Security to protect you from high risk people and security that ensures that your business money will not be lost.