By Bob Barragan
Without a doubt, one the most important aspects of small business financing is credit history.
A good credit history will simplify the initial start-up loan request or the request for an expansion loan for an existing business. It is extremely important that an individual or small business keeps track of their credit and makes every effort to maintain as near perfect as possible payment history.
Financial advisors and consumer advocates suggest that you review your credit report periodically for the following reasons:
• It might affect how much you pay when borrowing money.
• Make sure information is accurate when applying for a loan for a house, car, insurance or applying for a job.
• Help guard against identity theft.
An amendment to the Federal Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. For details, see Your Access to Free Credit Reports at www.ftc.gov/credit or call 1-877-322-8228.
If a person applies for credit at a bank and is rejected, normally a letter will be sent with reasons for the rejection. If the rejection was related to information found on the credit report, the individual must be told this, and given the name and address of the credit agency that holds the individual’s file.
If the credit agency is contacted within 30 days, there will be no charge to learn the contents of the file. Be aware that some credit reporting agencies will mail a copy of the records, while others will require a request be made in person to provide positive identification.
A credit report will contain detailed information on the accounts that are listed. The status of each item is indicated by a complicated code system that signifies exactly what has happened to the account and how the individual pays their bills. It will also contain identification information: name, social security number, last two addresses, date of birth and place of employment.
Make sure to check the record of employment carefully because it is often incorrect and a creditor will sometimes reject an application because they can’t confirm employment.
If a person is self-employed, the credit bureau will list them as unemployed. Be aware, also, that there is space on the report to add a consumer statement. This allows a person to use up to 100 words to explain any situation in the profile that the individual disagrees with, or feels further explanation is needed.
Under the Fair Credit Reporting Act, an individual not only has the right to see the contents of their credit file, but has the right to correct any errors contained in it. If a person finds any negative items, which are untrue, outdated, vague or misleading, they must send a letter to the credit bureau listing each incorrect item. Any information that cannot be reconfirmed must be deleted or changed.
If you have any questions regarding any business need, please contact the SBDC at (936) 294-3737 to set an appointment for free, confidential counseling.
