Are you a small business owner seeking low-cost funds to expand your business? Credit is key and often the first thing lenders consider when reviewing your small business loan application. To understand more, review this guest post from the SmartBiz Small Business Blog: What are Business Credit Scores, and Why are They Important?
If you haven’t reviewed your credit report recently, now is the time. In 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.
There’s a reason why your credit report might be incorrect. Unlike consumer credit, business reports are not covered by the Fair Credit and Reporting Act. According to NAV, a free way for business owners to manage their business credit, this means:
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.
So what is a small business owner to do? The first step is to review what is being seen on your report. Business Credit Reports, gives strategies you can use to increase your score:
- Pay suppliers in a timely fashion.
- Urge banks and vendors to report your good payment history to provide to all of the bureaus.
- Be sure to open credit cards, leases, credit lines and trade accounts in your company’s name instead of your name personally. Read more about this in the SmartBiz blog post: Personal Credit Score vs. Business Credit Score: 5 Reasons to Keep Them Separate.
If you’ve reviewed your report and found inaccuracies, contact Experian, Equifax and D&B immediately to make corrections on your report.
It’s important to note that there are two ways your credit can be checked. A hard inquiry, also known as a “hard pull”, will show up on your report and can lower that score. A soft inquiry, a “soft pull” will not affect your score or show up on your account.
If you’re seeking a low-cost SBA loan from SmartBiz, a “soft pull” will be done when you’re in the preapproval stage. If you prequalify, an SBA loan is the best bet to help expand your business with low rates and a 10-year term.