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By: CHEF Sonia, The Chef Alliance

What is a Credit Report?

A Credit Report gathers information about a person or a business from sources such as banks, credit card companies, collection agencies.  For businesses, they would also get information from industry organizations and corporate registries among others.  It is typically used to help a lender or vendor make a decision about your creditworthiness. i.e. when you or your business applies for a loan or a for a credit facility, they will want to know if you are worth the risk.

How Often Should I Check my Credit Report?
You should check your personal and business credit report at least once a year with the major agencies, as they each calculate credit scores differently.  Fees may apply for a business report but personal reports are generally free.  Even if you do have to pay a fee, the benefits outweigh the cost, as it allows you to check for errors and to see if you need to make changes to your personal or business financial practices to improve your credit rating.

What Should I Do If I Notice An Error?
Inaccuracies can negatively affect your financial needs.  Mistakes on your personal credit report can be addressed by you only; mistakes on a business credit report can only be rectified by the business owner or a registered corporate officer.  In both cases, you would use the credit bureau's Dispute Resolution processes.  

What Kind of Information Does Credit Reporting Agency Look At?
The following will help you understand how credit bureaus' retention of information can affect your business.  Equifax, for example looks at over 500 attributes, including:

  • Months since credit file opened
  • Number of credit trades on file
  • Total balance of open credit trades
  • Number of credit trades opened within 24 months
  • Number of credit trades currently 90+ days past due
  • Worst current delinquency for accounts opened within 12 months
  • Worst delinquency within 24 months
  • Months since most recent legal suit filed
  • Number of judgments filed within 12 months
  • Total amount of collection claims filed within 12 months
  • and much more

In Summary

As a small business owner, your personal and business credit score will always be a factor Understanding the information that the major credit bureaus collect is vital to help you maintain a strong personal and business credit profile, ensure the accuracy of the information collected and retained by the credit bureaus and, in turn, make it easier to secure loans, get approved for a payment plan or a credit card or negotiate a credit facility with suppliers and vendors.

Understanding The Importance of a Credit Report