Credit Restoration Services

Credit Restoration Services for Small Business Owners

When we think of credit, we usually think in terms of loans and mortgages or credit card debts. We are usually led to think of using credit as a bad thing, that anything owed is better off repaid and out of mind as soon as possible, and as if not having enough ready funds was failing of some sort. But that’s not really the case. In fact, there is a time when having credit and payables in the book is a good thing and that is when you are a business owner. Having a rich credit history – a record of loans being taken and being paid back – is more attractive to future lenders than simply having a clean, no-need-for-credit record of fiscal responsibility. Entrepreneurship is not often smooth sailing, however. Sometimes things just fall apart. Sometimes you are a victim of fraud. Some great entrepreneurs worth billions today did so after the experiences gained in earlier businesses that went bankrupt. How do they even manage to recover with glaring bad marks on their credit scores? That’s where credit repair companies and credit repair attorneys come in to help. Credit restoration services do more than just repair your reputation with bank and lenders, they can also help reduce the damage from present debts.

What is the Difference between Personal Credit and Business Credit?

• Personal Credit is tied to your Social Security Number (SSN), while Business Credit is tracked via your Employer Identification Number (EIN)

This means that while your personal credit score will follow you all your life, your business credit is tied to whatever business you use with your EIN. Businesses that change ownership structures (i.e., become a corporation or partnership, enter bankruptcy proceedings, or change from partnership to sole proprietorship) will need to get a new EIN. You can own multiple businesses under the same EIN. An EIN is required to pay employees and file business tax returns. Once your credit identity is established, it is difficult to start a new one. Victims of violence, harassment, or identity theft may apply for a chance in the SSN, but never simply to avoid bankruptcy or records of debt. Legitimate credit restoration services never ask you to cheat by misrepresenting your social security number or obtain a new EIN under false pretenses. Using harvested social security numbers will get you involved in identity theft.

• Business Credit reporting is separate from your Personal Credit

This means that while personal credit is compiled by the major credit bureaus (Equifax, Experian, and Transunion), business credit depending on the issuer is also reported to the major credit bureaus or only to commercial credit bureaus (Cortera, Dun & Bradstreet, Experian Business, Equifax Commercial, PayNet, etc.). If the small-business credit card issuer reports to both, then your personal credit may be affected. Sometimes issuers report to the credit compilation bureaus only if there is any negative information. If it only reports to the commercial credit bureaus, then if your personal credit is good then only your business credit score matters for any inquiries. Credit restoration services advising you on how to rebuild positive credit records can refer you to issuers that only report positive items to the credit bureaus.

• Personal credit score is about your spending history

Personal credit as compiled by the three major credit bureaus tell about

1. Your payment history for outstanding debts
2. The amount owed
3. The age of your credit history
4. The types of credit you have used (car loans, mortgage loans, credit cards, etc.)
5. New credit (recently opened lines of credit)
6. Hard inquiries (inquiries by lender or creditor to your credit file determine your borrower risk)

Credit Restoration Services

• Business credit is about the shape of your business

These are some of the factors that influence a business credit score and the likelihood of getting financing:

1. What are the business details?
2. How long has the business been in existence?
3. How consistent is the payment history?
4. How much is its revenue?
5. What are its assets?
6. What are its outstanding debts?
7. What is your personal loan history?
8. What are its legal records?
9. What is the industry risk for the business in question?

• Personal credit ranges from 300 to 850, business credit ranges from 0 to 100

According to FICO or VantageScores, a “Good” credit score ranges 670 to 850. Business credit scores however, are far more arbitrary depending on the credit bureau. Dun and Bradstreet Paydex for example, has three tiers: 80-100, 50-79, and 49 and below. Experian’s “Intelliscore Plus” is based on an algorithm that relies on credit records, public records, and statistics to build a risk factor. This goes from 1 to 5, with Risk 5 being a business score of 1-10, or a high risk of nonpayment. Equifax also ranges from 1-100, but if questioned will actually give three scores – a payment index, a credit risk score, and failure risk score. Payment index shows how regularly you pay your bills, which goes from 1-100, failure risk goes from 101 to 992, and failure risk from 1000 to 1610. The confusion arising from many different scoring systems is why engaging with a credit restoration service is a better use of your time.

• It is free to ask for your personal credit score, you have to pay for your business credit

There are many ways to get a free copy of your own credit report but to look at your business credit score, you almost always need to pay a fee. Commercial credit bureaus may charge in small monthly fees, or per-access. Companies can monitor other companies and their history of paying their suppliers via their business credit scores. This can make a difference between shipping out products with an invoice, or asking for payment up front before shipping goods. This can determine pricing and durations for contracts. By paying for a recurring monthly fee or for a report every so often, they can determine if a partner company is in trouble and manage their own risks of doing business. Credit restoration services rely on federally mandated protections for allowing access to their own credit reports at any time for an individual. Other people applying to look at your credit record is always noted, even if it may have been for an innocuous business reason. Sometimes too many such accesses may be misleading.

• Business debts can be isolated from your personal debts

Therefore you can take risks with business credit that would be unwise with your personal credit. If you are a corporation or limited liability company, your business can go bankrupt without affecting your personal assets. If you are sole proprietor, bankruptcy would affect your personal credit This is because your personal assets can be taken and sold by your creditors to help pay off your business debts. However, gaining new credit after personal bankruptcy will always help even if there may be higher terms or you are now personal averse to racking up new debt. Credit restoration services recommend building a positive history of being a reliable borrower that can pay on time.

• Business credit typically have higher limits than personal credit

On the other hand, business credit is also monitored more closely. Dun and Bradstreet’s PAYDEX, for example, relies mainly on the promptness of payments. A score of 80 means that on average you have paid debts on the day they were due. The longer you wait to pay off debts, the worse the score becomes. Therefore, unlike personal credit where paying on time is a virtue, paying ahead of time all the time is the only way to get scores close to 100.

• There are consumer protections in personal credit that are not present in business credit

One convenient method of building business credit is through a business credit card, which is easier to obtain than a business line of credit. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the CARD Act) doesn’t apply to business credit cards. A business credit card has higher limits that allow to separate work expenses from personal expenses, but mistakenly using one like a personal credit card can lead to unexpected fees or higher interest rates without any advance notice. The Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA) also require giving reasons why your consumer loan is rejected. This does not apply to business credit, though for businesses with an annual revenue of $1 million or less you may request the reasons for why you were turned down, as per ECOA requirements. Business credit cards, due to the expected nature of their purchases in large sums or items in bulk, to be accomplished speedily to settle deals, are not covered by protections against fraud by Electronic Funds Transfer Act (EFTA). Business credit card owners may have only 24 hours to report fraudulent misuse. This may vary with the voluntary liability protections between different credit card providers however.

Do I Need to have Business Credit as a Small Business Owner?

In short: no. But is always for the best to separate your business finances from your personal finances as soon as possible. For a sole proprietorship this may be more difficult as the business will be counted among their personal assets, and their personal credit will always be inquired when seeking financing or applying for a business credit card. Legally, the business is the same as the owner. Having a legally distinct business identity means you will have greater credibility and access to better financing options. Using your personal credit for your business can make it harder to achieve personal financing in the future – such as if you need to buy a vehicle or a home. Having business credit that potential clients and suppliers can look at will often lead to better deals. You will have access to higher loan amount opportunities that also come with lower interest rates. You may have access to business lines of credit, which is a good option for maintaining cash flow during off-season months or to invest in precipitous opportunities – but with lower interest rates compared to business credit cards and no fixed terms for repayment. Business credit also means that in times of great crisis, your debtors will not be able to seize your personal properties in order to repay delinquent loans. A small business or sole proprietorship tends to run on personal credit. As long as it is not an incorporated or limited liability company, all lenders will always look up your personal credit record when judging terms for your loan or financing. If your personal credit score is low, it is best to have your credit records repaired by credit restoration services before attempting to establish business credit.

How Can a Credit Repair Lawyer Help Me?

In theory, a credit repair company is not allowed to offer you any measures you would not be able to do yourself. In practice, just because you might be able to repair your car yourself is no reason to refuse sending it to a proper garage instead to be worked on by trained personnel. As you are always allowed to obtain a copy of your credit report, you may check all entries and if necessary raise a dispute about inaccurate or misrepresented details. Third parties can’t remove anything from your credit report, only the reporting company can do so voluntarily. Credit restoration services deal with reporting firms or sources of such submitted information to provide evidence for misleading or inappropriate negative items. (For example, delinquent accounts can be deleted seven years after the original date, and should not remain on the credit report.) It can be very labor intensive and time consuming, which would eat up opportunity costs for you to do something more productive that generates more income with this time. It can be stressful and complicated and take a lot of time. Credit restoration services can help alleviate this worry. A credit repair lawyer approaches the problem differently from a credit repair company as a credit restoration service. With a legalistic perspective and a focus on consumer rights, they can take action in more severe situations where you may need to file for bankruptcy or when a creditor is threatening legal action. Having an attorney already familiar with these situations can make a tough situation a little easier.

• They can note misrepresented items with credit bureaus and deal with instances of fraud and identity theft.
• They may speak to your creditors and help develop an easier repayment scheme while being able to defer lawsuits and the unjust seizure of your property.
• They can deter debt collection companies from acting too soon.
• They can advise you on what you need to do to improve your credit score.
• Finally, if necessary, a credit repair lawyer can represent you in court.

Most credit repair lawyers as a credit restoration service tend to deal with individuals with need for personal credit repair, however. Established business credit tend to need less rigorous attention since often failure is simply “part of the cost” of “doing business”. A credit repair attorney understands all the pressure that a person in need of credit repair is facing. This differs from what some cheap credit repair company will do which mainly boils down to merely pushing forms.