Whether you are just starting out building your credit history or trying to get back on track, there are things beyond the big three credit bureaus (Equifax, Experian, and TransUnion) you need to know about. There are other considerations influencing not only lenders' decisions, but also whether your path to the top of the credit charts will be smooth, quick, and successful.
This post is going to start the series about alternative agencies that might have information about you. You would be surprised to know how many companies collect this information. So let's try and take this element of surprise out of the equation. It is very important to know who is doing what. At least, this knowledge can help you modify your behavior; at most, it can protect you in case of a serious error or identity theft.
Writing checks and Debit History
It has happened to everyone. You write one check too many, and it bounces. Tell me it hasn't happened to you, and I'll say you are either a) young, b) one of the most organized people on earth, or c) less than honest. It surely has happened to the author of this post, as well as countless other people, and it is usually nothing more than a human error. Again, we have all been there; that is nothing to be ashamed of.
However, some people have a very bad habit writing bad checks intentionally. I won't go into the details about the reasons and rationales behind these decisions; but somehow, people don't believe that writing a bad check can hurt them credit-wise. That is wrong! It can, and it will, eventually.
The most important agency that deals with habitual bad check writing is ChexSystems. This is a nationwide agency that:
Provides account verification services to its members, which consist primarily of financial institutions. Collects data on checking account applications, openings, and closures, including reasons for account closure. When you apply for a new checking account many banks and credit unions will refer to this database before they approve the new account.
Of course, ChexSystems doesn't only deal with bad checks. Your banking history is often referred to as debit history. ChexSystems evaluates your potential risk to the financial institution, such as a bank or credit union you are trying to join. But writing bad checks, along with unpaid bills, is one habit that banks understandably frown upon. So, try to be careful. One thing that is even worse than inability to get a credit card, is being denied by a bank. Now, you really are in trouble!
And the reach of ChexSystems goes beyond banks and credit union. According to their FAQ, here are some interesting examples of who can request your debit history.
A business transaction initiated by you
Pursuant to a court order or federal grand jury subpoena
Use of information for employment purposes, with your written permission
Your application for a license or other benefit granted by the government, when consideration of financial responsibility is required by law
A child support determination, under certain circumstances
The "employment purposes" here is a very important data point. Of course, they can't request your file without your permission, but... Have you ever tried to deny such permission to your employer?
Unlike a credit report that discards your bad marks in seven years, ChexSystem does it in five. And here are other agencies that might have your debit file:
Early Warning Services
To be continued
This is a post by Andy Shuman, a credit and travel expert who blogs at www.Lazytravelers.net. He writes and blogs during and between trips that he enjoys free of charge mostly due to creative use of credit card offers. He believes that credit cards are much more than just a convenient way to pay for a purchase, and that the benefits of responsible credit habits can go far beyond getting the best rates for loans and mortgages.
Andy is the author of bestselling books from Lazy Traveler Handbook Series available on Amazon. When he's not traveling, he lives with his beautiful wife and daughter in Brooklyn, NY.
Questions? Suggestions? Keep them coming!
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