If you've ever been to a bank to open a new checking account, only to be halted halfway through the process and told that you couldn't do it, you're not alone. Millions of others have experienced the very same thing. The problem is that you have derogatory information in a large data-collection system, and it's not one of the credit bureaus.
Banks and savings and loans have their own internal customer reporting system that they subscribe to, where information on problem accounts can be shared with other member institutions. It's called ChexSystems, and though it's not one of the Big Three credit reporting agencies, it performs a similar task and can have just as severe an effect on you as the others. If you've had a checking account closed because it was overdrawn and you still owe money to the bank, any bank that belongs to the ChexSystems network (and virtually all of them do) will deny you a new account. When completing the paperwork to open an account, your name and Social Security number will be routinely run through the ChexSystems database. If there's information there concerning a past problem with any bank account, you'll be summarily denied.
What can you do about it? You'll receive a disclosure document with ChexSystems' contact information listed. If you don't know what financial institution has reported you, contact ChexSystems to find out. If you do know which bank it is, contact them directly in order to clear up the situation, and pay them off if you have to. Until that information is removed from the database, it'll be almost impossible to get a new checking account. And most potential creditors today require that you have one before extending you credit of their own.
On the other hand, if you've ever been shopping and given the merchant a personal check to pay for your items, only to have it rejected, you've run headlong into a completely different database. There are a number of companies that merchants can contract with in order to protect themselves against losses from individuals who write bad checks. One of the more well-known company names is TeleCheck. If you have an unpaid check that was written to a store which subscribes to one of these services, your name, checking account-, and driver's license numbers will be entered into the system. If you shop at another member store and attempt to pay by check, your purchase will be automatically denied. The merchant will give you the name and telephone number of the company that's disallowing the acceptance of your check.
When the company receives the check that you wrote for insufficient funds back from your bank, they'll send you a letter requesting the amount of the check plus additional fees. Once you've paid the company (by cashier's check, money order, or cash), your name will be deleted from its records and you'll again be able to write checks.
The companies who service the merchants with the bad check database do not report you to the credit reporting agencies. The only time you'll be reported to one of the credit bureaus is if you refuse to pay the check and the company turns the matter over to a collection agency. The collection agency may then file derogatory information against you.