You understand how credit and credit reporting works. You realize that your ability to obtain credit is based largely on the information contained in your credit report. But when you apply for an apartment, write a check, or even install a phone, are you aware that the companies you do business with could be checking more than just your credit report?
In a world of Information technology, the collecting and sharing of information is a common practice. It can mean convenience for conscientious consumers that have a habit of paying bills on time. It can also mean failure to obtain rental housing, open a checking account, or even have a phone installed if your accounts fall too far behind-even if the information is not reflected on your credit report. Much like lenders and credit card companies work together to report information about accounts to third party vendors that manage and share the information (the credit bureaus), other companies such as retailers, landlords, and phone companies are also agreeing to report information to third party vendors that specialize in the areas of bad checks, phone accounts, or tenant evictions-the types of accounts that are not usually reported to the credit bureaus and do not normally show up on credit reports.
Check Verification-Bad Check Databases
With the increased usage of electronics in day-to-day business affairs, more transactions are occurring that take place instantly, but that involve somewhat of a credit risk. For example, when you write out a check at the grocery store, it would hardly be practical for a business to expect you to wait 5-7 days to purchase your groceries while they assessed your credit risk by checking your credit report. Yet, these businesses need a system whereby they can verify the likelihood that your check will clear.
Some retailers have systems in place that automatically allow them to verify your available funds before they accept your check. Others use network companies such as the Shared Check Authorization Network (SCAN) that operate in a similar fashion to that of credit reporting agencies. Some retailers and other businesses associated with SCAN work together to report bad checks to this company, which in turn provides check verification services to these stores, letting them know if a check writer has a history of writing bad checks.
This system works much like credit reporting, in that retailers use the information to screen out a percentage of all bad check writers up front. Much like lenders can check your credit report to find out if you have a reputation for paying your bills on time, retailers can use SCAN to find out if you have ever written checks on an account that contained insufficient funds to cover the checks. Unlike credit bureaus, though, these types of companies can sometimes work as collection agencies as well as information providers-recording the names of bad check writers in their databases and simultaneously attempting to collect money lost from checks returned due to insufficient funds.
This system can make check-writing more convenient for you if you are careful to always be sure funds are available to cover checks written. However, consumers should be aware that many banks also verify your check-writing history with companies such as SCAN and use this information to determine whether or not they will open you a checking account. While a couple of checks bounced due to innocent mistakes probably won't hinder your ability to open checking accounts, if you are not careful or if you make a habit of it, you could find yourself trying to save money in a cookie jar and paying cash for all purchases instead of using a checking account to manage your income. Even if bad checks do not show up on your credit report, the inability to open checking accounts could inadvertently affect your credit rating, because many lenders may want to see that you have some liquid assets, even if your credit history is immaculate.
Tenant Screening-Eviction Records
When you go to apply for an apartment, it is most likely that the landlord will check your credit report. Failure to pay rent, however, does not appear on your credit report unless your landlord takes you to court and there is a judgment issued against you. Thus, landlords sometimes seek additional information to that contained on your credit report, such as whether or not you have ever been evicted from rental housing.
Many independent companies, such as Landlord Connections, Inc., maintain reporting services of their own that landlords can use in addition to your credit report to evaluate your credit risk. These companies also work much like credit bureaus-they involve a network of landlords who report their tenants who have given them trouble or have been evicted and can then check an applicant's rental history with the company.
Many of these companies also specialize in searching public records and compiling a report that they provide to landlords for a fee. This report can contain information such as:
- Whether you have been brought to court by another landlord
- Whether you have brought your landlord to court
- If you have ever been locked out of your apartment by the Sheriff
- If you have ever moved owing rent or damaged an apartment
This actually could be beneficial for consumers with shaky credit histories. New landlords may see that you had trouble paying some bills, but that rent was always your number one priority and that there is no record that you have had any trouble with your previous landlords.
It is important for consumers to remember that while your payment information may not be reported on your credit report, it could still appear in tenant screening reports, making it very difficult for you to rent an apartment, even if your credit report reflects positive payment information.
Telecommunications Reporting-Defaulted Phone Account Records
In addition to landlords sharing eviction information and retailers sharing bad check information, telephone companies also share information about defaulted accounts that is managed by a third party vendor called the National Consumer Telecommunications Data Exchange, Inc. This company proclaims its purpose as being "to protect telephone companies from some residential customers that move from phone carrier to carrier without paying for services provided."
Again, working much like a credit bureau, telephone companies that are members of this Exchange report defaulted and/or fraudulent consumer telecommunications accounts and have access to information in the database that has been reported by the other phone companies belonging to the network.
Phone companies can then check a "phone credit report," that would include information as to whether or not your phone service was terminated with an unpaid balance. The network maintains set policies that the phone companies adhere to, such as reporting closed residential accounts that were unpaid and undisputed in excess of a certain dollar amount.
So, if you switch to another carrier without paying your phone bill, you may find it almost impossible to find a telecommunications provider the next time you try to install a phone. If your account does not show up on your credit report as an account in collections, but you still owe, you may want to contact your phone carrier and discuss payment options.
Currently, most of these companies do not offer consumers services such as finding out what has been reported about you. To determine whether any of these companies have records on you, you may wish to speak to your landlord or telephone service provider and find out if they belong to any such information-exchange organizations.