How small errors are affecting the credit of millions of borrowers

When Americans begin struggling with mounting bills, it does not often take long for a relatively small debt problem to become overwhelming. When your debt load is larger than your income, it can be all too easy to miss payments, bounce a check or overdraft without meaning to. If you simply do not have the money to pay your bills on time, it may feel like you have few options to keep you on track financially.

When these occasional missed payments, bounced checks and overdrafts begin to result in bank fees, late fees and increasingly frequent calls from bill collectors, your financial situation can begin to seem like it is spiraling out of control. However, even if you can regain solid financial footing without declaring bankruptcy or seeking a loan modification, the small slips you made in your payment history may affect your credit for years.

According to the New York Times, many of America's largest banking institutions operate private databases that track payment histories and banking activity. When low-income Americans in particular have a financial slip like an overdraft or a bounced check, the small misstep can affect their credit for up to seven years. The Times has gone so far as to characterize the credit consequences of these relatively insignificant mistakes as effectively blacklisting over one million low-income individuals from obtaining credit within the mainstream financial system.

These banking transgression databases are separate from the major credit reporting databases that help to determine one's credit score. Unfair blacklisting by the banking system may often be corrected with the help of an experienced attorney. If you believe that a small financial mistake may be keeping you from obtaining credit you otherwise deserve, it may be highly beneficial for you to contact an experienced bankruptcy attorney in your area who can help you navigate your legal options.

Source: New York Times, "Over a Million Are Denied Bank Accounts for Past Errors," Jessica Silver-Greenberg, July 30, 2013