What you find on your business credit report may surprise you …
In 2005, I received a generic rejection letter that overwhelmed me. He said my business financing request was denied due to information on a credit report.
“What the hell?!?” There must be some mistake. I knew my personal credit was impeccable.
After several calls to the lender, it was finally clarified that my business credit report was the problem, not my consumer report.
Four weeks later, I finally had my report in hand. It was loaded with glaring errors and passed me off as a trade credit risk.
An all too common problem
My story is just one example of hundreds of business owners who have been needlessly tripped up because of errors in their business credit report.
According to a Wall Street Journal survey, 25% of small business owners who checked their credit reports found errors that put them in a riskier category.
And these were just the substantive errors. Who knows how many discrepancies have been ignored?
Unfortunately, these mistakes can be fatal. A low trade credit score could cause lenders to reject your financing request, force you to pay suppliers cash on delivery for inventory, pay higher insurance rates, and more.
Let’s take a look at three reasons why mistakes are so common on business credit reports and how you can defend yourself.
1. No FCRA protection for business credit
As soon as you start a business, services like Dun & Bradstreet and Experian begin to develop a credit report on your business.
They do this by going through public records and other available financial data, all without your knowledge.
Unlike your consumer credit, your business reports are not protected by the Fair Credit and Reporting Act (FCRA).
- No formal process to dispute errors. Offices do not face any defined legal consequences in the event of non-compliance.
- No authorized lens is required. A business or individual can check your business credit without your knowledge or permission.
- No notice required. If information in your activity report is used against you (for example, your provider denies you a line of credit), they are under no obligation to notify you. Negative mistakes on your reports could cost you dearly and you would never know it.
2. Trade names merge
To complete a consumption report, bureaus look at four things: social security number, date of birth, address, and name. At least 3 of the 4 must match. This is to ensure that people’s profiles do not change.
When it comes to an activity report, the offices are simply the name and address of the company. Neither need be exact.
Therefore, it is not uncommon for the profiles of two companies to not match. Imagine how easy it would be for franchises that all share a common DBA (ABN) name to cross paths!
Check your business credit reports for errors
3. Creditors are not identified
Most credit reporting services maintain the anonymity of the sources that provide them with bill payment records, such as your vendors, vendors, and other customers. This is why the names of creditors are not disclosed on companies’ credit reports. It’s much harder to see if there are any errors on your report if you can’t tell which creditor is making the report!
How to protect your business
Correcting discrepancies in business credit reports is not always easy. An SBA survey found that 23% of small business owners had difficulty disputing or correcting a mistake with a debt collector or credit reporting company.
It took me months to sort out the errors in my activity report with the offices. But once I did, I got the loan approval I wanted.
The best strategy is to regularly check your reports for missing or inaccurate data with a business credit monitoring service and immediately report errors to the bureaus. Some services will even make the litigation process easier for you.
Don’t overlook the small mistakes! Something as simple as an incorrect SIC code (used to classify the industry type of your business) can lower your credit score.
Through continuous monitoring, you will also be alerted in real time if anything changes in your reports. This way you will avoid any unpleasant surprises along the way and can start the dispute process earlier.
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