How to Repair Damaged Business Credit
There are allot of benefits in building business credit. For one, a credit profile can be built for a business that is completely separate from the business owner’s personal credit profile. This gives business owners DOUBLE the borrowing power as they have both Personal and Business credit profiles built. Another business credit benefit is that business credit scores are based only on whether the business pays its bills on time. As a result, a business owner can obtain credit much faster using their business credit profile versus their personal credit profile.
Approval limits are much higher on business accounts versus personal accounts. Per SBA, credit limits on business cards are usually 10-100 times higher than consumer credit. Another benefit of building business credit is that when done correctly Business Credit can be built without a personal credit check. Business credit can quickly be obtained regardless of personal credit quality. One reason most business owners love business credit is that most business credit can be obtained without the owner taking on personal liability, or a personal guarantee. This means in case of default, the business owner’s personal assets cannot be pursued.
There are three major companies that collect business information and publish it. They are Dun & Bradstreet also known as D&B, Experian, and Business Equifax. Dun and Bradstreet is the biggest and major business credit reporting agency. Dun and Bradstreet is a publically traded company with a headquarters in Short Hills New Jersey, and trades on the New York Stock Exchange. The main credit score used in the business world is known as a Paydex score, provided by Dun and Bradstreet. The Paydex score ranges from 0-100, with 100 being the best score a business can obtain.
Experian was formerly a division of TRW, an automotive electronics giant. TRW was originally founded in 1901 as the Cleveland Cap Screw Company. Experian’s most recent score system is known as Intelliscore Plus, which they boast of as the next level in credit scoring.
Equifax is called the “Small Business Financial Exchange” and is the most important for cash lenders such as banks. Equifax’s main business credit scoring model is the Credit Risk Score. Credit scores range from 1-100, with a lower score indicating a higher risk of serious delinquency.
Many business owners think they have items reporting on their business credit reports that really aren’t reporting. But over 90% of trade vendors don’t report to the business credit reporting agencies. So chances are good that the negative information you think is on your report might not even be there.
Creditors will usually notify you in writing before they report the data to the business credit reporting agencies. They will even notify you multiple times in some cases that they are about to report the item on your report. In many cases even the reporting agencies like Experian will notify you before they report negative credit. They might even send you three or more notices CLEARLY telling you that someone is about to report something negative on your report and advising you to call the creditor and resolve the dispute.
Obtain Business Credit Reports to know what’s on your business credit; you should obtain business credit reports from the main business credit reporting agencies. Business Credit reports are offered by Experian, Dun & Bradstreet, and Equifax. You will first want to get a copy of your business credit reports to see what is being reported. You can enroll for the DNB iSelf Monitor from Dun and Bradstreet to monitor your credit during the building process with D&B. To get your reports from D&B visit www.mycredit.dnb.com. A subscription for D&B Self Monitoring will run you about $39-99 per month depending on the type of report you want.
To get your Experian reports visit www.experian.com/small-business. Experian typically charges you $36-175 for a full report. You can purchase a copy of your Equifax Small Business Credit Report here www.equifax.com/small-business. Equifax will charge $99 for a full report.
You might have already heard of the FCRA. The Fair Credit Reporting Act outlines consumer’s rights to dispute inaccurate information on their credit reports. But it’s essential to know that this law does NOT apply to business credit repair. There are currently no laws which outline business owners’ rights regarding credit disputing. The FCRA also requires credit issuers to notify you of what bureaus they pulled your credit data from to determine your denial for financing. In the business credit world this is not the case, you rarely ever know the source that pulled your business credit or which reporting agencies they pulled it with.
If you see accounts or details you don’t recognize or you feel are inaccurate, request a debt validation for that account using a debt validation letter. A debt validation is where you solicit the creditor for verification of the account details they are reporting. They will typically send you back details of your account that they are reporting. The FCRA and the fair debt collections practices act apply to consumer debts, not business debts. Therefore, you can send a debt validation letter, but the creditor is not required by law to respond to your dispute.
When sending a debt validation request, your request must be sent to the creditor in writing. Also insure you dispute the debt with the credit reporting agencies if the creditor doesn’t respond to your request. If no response is received within 30 days of mailing the letter directly to the creditor, then you should then dispute the account with the business credit reporting agencies. To dispute a debt with the business credit reporting agencies, first contact customer service with any of the three reporting agencies for billing disputes, challenging payments and outdated public filings that appear on your report.
When you dispute an item the business reporting agencies will have vendors re-verify payments and remove charges if the vendor cannot verify the information. The business credit reporting agencies can also help to clear up issues that have been settled or dismissed, yet still appear in your report. You may be asked to send in documentation to verify a settlement or dismissal. The business credit reporting agency will then recheck the status of the public filing if you do not have documentation.
iUpdate from Dun and Bradstreet provides US based Small Businesses and Non-publicly traded companies convenient access to D&B’s information on their business. Registered users can view, print, and submit updates to their D&B Business Information Report. Many business owners don’t know that credit monitoring services for Dun and Bradstreet reports are actually provided by a private company known as D&B Credibility.
Credit monitoring is now provided from D&B themselves, instead it’s offered by D&B Credibility, a completely separate entity. Do NOT get upsold by D&B Credibility. You do NOT need their business credit building package as it really won’t help you in business credit building, so don’t let them charge you hundreds of thousands of dollars for their business credit builder package you don’t really need.
Keep in mind, the business credit reporting agencies may not be allowed to release the name of the person making the negative reference on your report. REMEMBER, you don’t have the same rights as you do with consumer credit reporting as there is no Fair Credit Reporting Act. If your debt validation and investigation don’t net you the deletion of the derogatory item, next you need to contact the creditor. Find out from them what you must do to have the item removed from the business credit report. Usually, they will remove the account if you pay the outstanding debt.
The main reason for a derogatory item to be on the report is usually because the creditor feels there is an outstanding balance that you owe them. So they will typically remove the account if you pay the outstanding debt. If you reach an agreement for deletion, get the agreement in writing. Insure they provide you a time frame of when they will correct the damage on your report.
Business credit scoring is based on how you pay your bills. If you pay the majority of reported accounts on time or early, you will have a good score. Most business owners have little to no credit reporting. So even one negative account can have a BIG impact on their business credit score.
It is essential that you continuously build your business credit profile just as you do with your consumer credit. One of the best ways to battle negative information on your report is to offset it with LOTS of positive information. So continuously build your business credit profile just as you do with your consumer credit.