Imagine the following scenario. You apply for financing for your business, but you’re turned down. When you ask the lender why your application was denied, it’s because of negative information that showed up on your business credit report.
There’s just one problem – the negative information on your business’ credit report is a mistake.
Common Errors on Business Credit Reports
It can be discouraging when problems on your business credit report keep you from qualifying for business financing or services. But when the negative credit information which is holding you back shouldn’t be there in the first place, it can be infuriating.
Here’s a look at three common errors found on business credit reports. (Keep reading below and we’ll show you have to fix these errors if they happen to your business.)
1. Mixed Business Reports
It’s surprisingly common for a business credit report to list accounts that actually belong to another company. The reason this type of error happens frequently is because of the way the business credit bureaus add information to credit files.
When a creditor (aka data furnisher) reports information to a business credit bureau, the bureau has to match the account with the correct company and add it to that business’ credit report. To accomplish this match, the business credit bureaus will pair up the account to a company’s name and address – but neither has to be exact.
If another business has a similar name or address to yours, there’s a possibility that business’ account could accidentally end up on your company’s credit reports.
With your personal credit reports, by comparison, the consumer credit bureaus look for a three out of four match of the following: name, Social Security Number, date of birth, and address.
It’s easy to see how the less-thorough data matching policy the commercial credit bureaus use to add information to a business credit report can lead to mix ups. The system itself leaves a lot of room for error.
2. Years in Business
Another mistake which can commonly show up on a business credit report has to do with the number of years your company has been in business. Here’s an example of a business credit reporting mistake which many business owners might be tempted to ignore. However, when it comes to your business, age matters (the older, the better).
On the surface, it might not seem like a big deal if your business credit report says you’ve been in business for only five years when it’s really been eight. Yet the age of your business is an important factor to many lenders when you apply for financing or vendor accounts for your company.
Note: The age of your accounts is an important factor in some business credit scoring models. If an account on your company’s credit report, like a business credit card, is reported as younger than it should be, the mistake might impact your credit scores unfairly.
3. Identity Theft
It’s no secret that credit reports contain a lot of personal, sensitive information that you wouldn’t want to get into the hands of the wrong people. On the consumer side, the Fair Credit Reporting Act prevents the credit bureaus from sharing your credit information with anyone who doesn’t have “permissible purpose” to access your data. Sadly, businesses don’t enjoy these same protections.
You have no legal right to privacy when it comes to business credit reports. The credit bureaus can sell them to anyone willing to pay for them.
In addition to the fact that your business credit reports aren’t private, information about your business may also be publicly available via your Secretary of State’s website. The bottom line is this – it’s not difficult for a fraudster to get his hands on your company’s information.
Once a thief has your business’ personal information (e.g. EIN, business name, and address), he may use it to open accounts in the name of your business. Business credit cards, lines of credit, business loans, and other sources of financing could be fraudulently opened in your business’ name, without your knowledge.
This potential for business identity theft is one more important reason why it’s crucial to monitor your business credit reports frequently. Monitoring your credit reports might not prevent business identity theft from happening, but it can enable you to react quickly if the crime ever happens to your company.
Unfortunately, errors on business credit reports occur more often than you might believe. A Wall Street Journal survey found that 25 percent of small business owners who checked their business credit reports discovered errors. Worse yet, the errors those business owners discovered put their business into a riskier credit category.
Your business doesn’t enjoy the same protections when it comes to credit reporting as you can count on for your personal credit reports. The Fair Credit Reporting Act, a federal law which protects consumers from inaccurate and unfair credit reporting practices, doesn’t apply to your business.
That being said, the business credit bureaus do allow you to dispute incorrect information on your business credit report when you discover a problem.
Here are five steps to fixing errors on your business credit reports:
- Check your business credit reports and review them for accuracy. It’s a good idea to check your credit reports with all three of the major business credit reporting agencies – Dun & Bradstreet, Experian, and Equifax.
- Make a list of any incorrect information you find, even if you don’t think the error is a big deal. Unless you’re a data scientist who creates credit scoring models for a living, you won’t really know whether a mistake has the ability to influence your business credit scores. It’s better to be safe than sorry and dispute any information which is inaccurate.
- Initiate a separate dispute with each business credit bureau that is including incorrect data on your business credit reports. Here’s how to submit a dispute with each of the three major business credit reporting agencies:
- Don’t take no for an answer. If your first dispute fails, but you know that the information on your business credit is wrong, it’s okay to follow up. Be sure to include supporting documents to strengthen your claim, if possible.
- Keep an eye on your business credit reports to make sure they remain accurate. Monthly credit checks are a good idea, both for your personal and business credit reports. If you’re checking your reports every month, you will be able to react quickly if and when a problem occurs. A free account from Nav can make this process a lot easier (and a lot more affordable).
Learn more: Experian business credit report
Additionally, if the errors on your business credit report are a result of identity theft, the business credit bureaus may be willing to include a fraud alert on your report. Fraud alerts let future lenders know they should take extra steps to verify that any credit applications in your company’s name are legitimate.
No One Cares More Than You
In a perfect world, you would be able to expect your business credit reports (and your personal credit reports for that matter) to contain only accurate information. Yet the truth is that credit reporting mistakes happen all too frequently.
It’s up to you to review your credit reports – both business and personal – to make sure they remain error-free. No one else can do this job for you. Furthermore, no one cares more about the health and accuracy of your credit reports than you.