Time to Review Your Company's Credit Report

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Still, a black mark on a business credit report can keep you from getting trade lines, especially from larger vendors. "Dell is not going to sit and call the banker for this small business owner," says David Gass, president of Business Credit Services, a Las Vegas firm that helps small companies obtain credit. "They simply say: 'Let's pull a D&B report.'" He suggests that companies begin to build business credit by opening business accounts with office supply stores, shipping companies, and other vendors that will report the transactions to the bureaus.

Correcting Mistakes

Small business owners should also remember that information in business credit files can be purchased by anyone—including competitors. For that reason, Gass says, you should be careful before supplying financial statements or other data you might not want to be made public. If lenders want to see financials before extending credit, you can provide them directly.

Gass says correcting mistakes on a business credit report can be difficult, though credit bureaus say the first step is to contact them and report the error. He warns that before purchasing services from bureaus offering to update your profile, make sure the information being compiled on your company will not raise a red flag. For example, he says, the listing of a post office box address or a nonworking phone line can make your business appear less than legitimate, which would reflect badly in an updated credit file.

The credit bureaus differ in how they correct information. While Dun & Bradstreet sells services to update credit files, Experian says all its information is collected from third parties and public records, rather than business owners themselves.

Credit Report Nightmare

Depending on how your business is organized, your personal credit report may be as important or more than your business credit file. For sole proprietorships or partnerships, in which the owners are personally liable for business debts, creditors take into account personal credit histories. Even for incorporated businesses, any credit lines that are personally guaranteed—such as many business credit cards (BusinessWeek.com, 8/20/08)—can be affected by your consumer credit record.

Errors in either business or personal credit reports can turn into a nightmare for your company, as they did for Bill Leake, CEO of Apogee Search, a 63-employee online marketing firm in Austin. Last May, his personal credit report erroneously showed a utility bill from an old office address as unpaid. American Express (AXP) froze Leake's credit across several cards that he depended on to buy $250,000 worth of online advertising a month for clients. "It turned out that an error on a credit report that we're able to prove was an error on a credit report had flagged something on their system," Leake says.

By law consumers can get a free copy of their personal credit reports (BusinessWeek, 9/17/07) from each bureau once a year, but business owners must purchase reports on their companies. If you don't know what's in your personal or business credit files, now is a good time to check and correct any mistakes, says Experian's Meder. "It's very important in times of tightening credit, both on the commercial and the personal side, that you want to say as clean as possible for both," he says.

Tozzi covers small business for BusinessWeek.com.