Credit History

April 13, 2006

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Lenders will want to review both the credit history of your business (if the business is not a startup) and, because a personal guarantee is often required for a small business loan, your personal credit history.

It's often a wise decision to obtain a credit report on yourself and your business before you apply for credit. If you discover any inaccuracies or problems, you can correct them before any damage to your loan application has occurred. If you can, find out which credit reporting company your prospective lender uses and request a report from that company.

Commercial credit. Before you apply for commercial credit, you should review a credit report on your own business, if your business has been in existence for a while. You can obtain a free Business Information Report on your own business from Dun & Bradstreet, by calling 1-800-234-3867. If D&B does not yet have any information on you, they will allow you to voluntarily obtain a listing by providing them with some basic information about your business.

Most conventional lenders will expect a minimum of four or five trade experiences listed on a business report before they consider the business's creditworthiness. If you have been operating your business without credit, or with personal assets, you should consider making some trade credit purchases in order to establish a credit history for your enterprise.

Consumer credit. Consumer credit agencies are required to remove any information from the report that cannot be verified or is shown to be inaccurate. However, before you submit a letter disputing any debt to the credit reporting company, it's often a good idea to contact the relevant creditor directly. If an error was made, you can often clear up the dispute more quickly if you take the initiative.

If the dispute is not resolved and your credit report is not adjusted, you have the right to file a statement or explanation regarding the alleged debt with the credit report. If your credit report does have some tarnishes on it, you might consider requesting that any creditors with whom you have had a good credit history, but who did not report the transactions, be added to the report. For a minimal fee, most credit bureaus will add additional creditor information.

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The three major consumer credit reporting companies are TransUnion (800-916-8800), Experian (formerly TRW) (800-288-2585), and Equifax (800-685-1111). Dun & Bradstreet (800-234-3867) is the largest business credit reporting agency.