Guidelines for Choosing Among the Three Major Credit Reporting Agencies

Individuals or businesses not listed with one of the major credit reporting agencies may risk being denied funds or will be required to furnish a personal history check and personal guarantee. That’s why choosing to register with one of the major credit reporting agencies is an important step for any business looking to assess risk, obtain funds, and ensure smooth financial transactions in their financial investments. Over thirty agencies exist in the United States, but only three are major establishments.


Each collect the same basic information, including name, social security number, date of birth, employer, current debts, how many times a profile has been accessed, and payment history. All three work with the Fair Isaac Corporation to calculate FICO scores. However, these scores will vary because all three collect information differently and each use their own methods to assess that information.


Because these methods vary, FICO scores can differ between them by as much as 100 points—an enormous difference for an individual or business looking to obtain funds or have a financial transaction approved. That’s why it’s important to have guidelines for choosing one.


While banks use the bureaus to determine creditworthiness, many businesses have even larger investments at stake, especially when bonds are issued to investors and business ratings help safeguard those investments. The first step in choosing between the major credit reporting agencies is to determine which bureau the majority of suppliers, creditors, and lenders pull their reports from. For businesses, this can be done by contacting its existing business partners and asking for the information.


These establishments should then be asked to provide their evaluation of the following criteria:


Criteria 1: How accurate is the data being collected? Call each agency directly and ask what methods they use to ensure that the information that other companies send them is accurate. Next, contact lenders, data furnishers, and so forth, as well as existing business partners and ask what their experience with the bureau has been like. If those registered with a specific bureau have a long enough history with the bureau, they will have some idea as to how often they have dealt with disputes that proved to be reporting mistakes.
Criteria 2: How accessible is the database? A good way for businesses to determine this is to contact its existing business partners and ask for their personal evaluation. Were they easily able to get a representative on the phone? Does the bureau require a member to buy its products in order to qualify for personal assistance?
Criteria 3: What are their marketing practices? Do they offer free services or is there a grace period where you eventually have to pay for those services?
Criteria 4: How are they perceived by other institutions? If the bureau has a good reputation with the establishments who use them, they should score high in their accuracy of data, method of scoring, and general accessibility.


Apply for Business Credit: Advice for Business Owners

As an individual who can benefit from some financial flexibility, you probably have some personal credit. But what about as a small business owner? Do you need business credit? While you might be able to start a business just on personal funds and loans from friends, eventually you will want to apply for business credit for a number of reasons.


Reasons to Apply for Business Credit: Growth

Sure, you might have enough money in your personal account to get started in your business, but what if you get more orders than you have inventory? If you need to fill your stockroom fast, you’ll need money to pay for those extra goods. And what about when you’re ready to expand? Finding new space, advertising and buying more equipment costs money, and even if you’re doing well right now, you might not have quite enough in the coffers to cover all those costs. Furthermore, it’s a good idea to have a little extra capital available in case of unforeseen circumstances, be it an unanticipated setback or an unexpected opportunity.


Reasons to Apply for Business Credit: Favorable Terms

Perhaps you took out a second mortgage on your home to start your business, or used credit cards to get going. A line of business credit can pay those off and potentially get you more favorable rates, taking less pressure off your personal finances and creating payments that you can easily make every month. It’s usually a good idea to keep your personal and business finances separate anyway. If you’ve borrowed from friends or family to get your business started, this may be a good time to pay off those debts and create a clear separation between your personal and business relationships.


Reasons to Apply for Business Credit: Reputation


In the business world, having a credit picture puts you on the map. When potential business lenders and other companies in your market space want to know about you, the first thing many of them are likely to do is pull up your business credit profile. If you don’t have one, those companies are likely to look elsewhere, towards a known quantity. Counter to what may seem intuitive, even having average credit is better than having no credit. However, if you are in a position where you don’t know if you need credit right now, there is no reason why you can’t have great credit. Simply apply for business credit, then make your credit payments every month, and your behavior will be reflected favorably on your business credit report. In fact, if you are in a good position financially right now, you can even make your payments before they are due and find yourself in the top portion of business credit ratings. This way, not only will other companies want to do business with you, but when you find yourself facing a major expansion and in need of a large business loan, you should have no trouble getting it, and at terms that will work for you.