What you find in your business credit report may surprise you…
In 2005, I received a generic rejection letter that floored me. It said my application for business financing was denied due to information on a credit report.
“What the heck?!?” There had to be a mistake. I knew my personal credit was spotless.
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 got my report in my hands. It was loaded with egregious errors and made me look like a business credit risk.
An all-too-common problem
My story is just one example of hundreds of business owners who are unnecessarily tripped up because of mistakes on their business credit report.
According to a Wall Street Journal survey, 25 percent of small business owners who checked their business credit reports found errors that put them in a riskier category.
And these were just the substantial errors. Who knows how many discrepancies went overlooked?
Unfortunately, these mistakes can be killers. A low business credit score could prompt lenders to reject your financing application, force you to pay suppliers cash on delivery for inventory, pay higher insurance rates, etc.
Let’s look at three reasons why errors 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 company.
They do this by scouring 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 for disputing errors. The bureaus face no defined legal consequences for non-compliance.
- No permissible purpose is required. A company or individual can check on your business credit without your permission or knowledge.
- No notice required. If information in your business report is used against you (e.g., your supplier denies you a credit line), they are not required to notify you. Negative errors on your reports could be costing you and you’d never know it.
2. Business names get mixed up
To populate a consumer report, the bureaus look at four items: Social Security Number, Date of Birth, Address, and Name. At least 3 of the 4 have to match. This helps ensure that peoples’ profiles don’t get switched up.
When it comes to a business report, the bureaus just match the business name and address. Neither one has to be exact.
As a result, it’s not uncommon for two business’s profiles to get mismatched. Imagine how easy it would be for franchises that all share a common DBA (ABN) name to get crossed up!
3. Creditors are not identified
Most credit-report services guard the anonymity of sources that provide them with bill payment records, such as a your suppliers, vendors and other customers. That’s why the creditor names are not disclosed on business credit reports.It’s a lot harder to see if there are errors on your report if you can’t tell which creditor is doing the reporting!
How to protect your business
Fixing business credit report discrepancies isn’t 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 firm.
It took me months to sort out my business report errors with the bureaus. But once I did, I got approved for the loan 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 facilitate the dispute process for you.
Don’t overlook small mistakes! Something as simple as an incorrect SIC code (used to classify your business industry-type) can lower your credit score.
With continual monitoring, you’ll also be alerted in real-time if anything changes on your reports. That way you’ll avoid any negative surprises down the road, and can start the dispute process sooner.