You already know that bad credit is a basis for being rejected when you apply for loans. However, did you know that you could ruin your chances of opening a bank account if you have a bad credit? Your bank history may be completely compromised if you have a credit problem. Right now, it is said that more than 25 million Americans are blacklisted by more than 80% of the banks in the country because of bad credit.

If you overdraft your bank account several times and you do not pay your debt on time, you are in danger of being listed in Chexsystems. Overdraft in your bank account per se is not bad, but if this becomes a habit, you may be at risk of getting blacklisted. It is recommended that you prevent any form of autodraft payment if you are not regularly receiving salary. Overdrafts alone will not get you banned from opening accounts. Banks are more lenient about overdrafts than we think, but only if you pay the penalties and pay back an overdraft in the appropriate timeframe.

Why do banks resort to banning people from opening accounts? There are a lot of people who use the overdraft loophole to make money. They overdraft and do not pay the bank what they owe. Then, they simply leave their debt behind and open a new account with another bank. This cycle could go on and on if the bank does not take action.

This is why the Chexsystems list is used by so many banking institutions. This provides bank account credit histories for almost all financial institutions in the United States. Because of this system, most banks know which users regularly try to game the banking system by leaving overdrafted bank accounts unpaid and opening new ones. If you have a bad history of overdrafts, there is a chance that you are already listed in Chexsystems. A financial institution needs only to check the Chexsystems list to know that a customer has been banned from opening any type of account in banks.

Chexsystems is not responsible for banning a customer. It simply provides information to institutions about users with bad credit and shady financial history. This kind of information will be the basis of rejection or acceptance of your application. Moreover, this entity is regulated by the Fair Credit Reporting Act.

If you’re intent on cleaning your act, you have to wait for five years before your name gets deleted from Chexsystems. This means for five years, you may not be able to open an account with a banking institution that uses the list to screen applicants.

If you’ve been locked out from opening accounts because you’re listed in Chexsystems, you can check with the administrator and dispute claims against you. The legal way to do this is to submit a one-paragraph counter explanation for every mark on your financial record.

The most immediate way to deal with this predicament is to contact the banks you have an overdraft in and ask them what they need you to do. Paying off the overdraft will almost always put you in good standing with that banking institution. Once you settle this, you can contact Chexsystems again to begin cleaning up your records.