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Just like a personal credit report, the accuracy of your business's credit report is important to the financial health and longevity of your company. Errors in data management, balance, account status and more can present a (falsely) negative picture of your finances, limiting access to capital and resulting in misguided advice from financial professionals.
Below, the members of Forbes Finance Council share their firsthand experiences with misreported credit data. They discuss some of the real-world consequences your business could face, along with recommendations for ensuring your business credit reports are up to snuff.
1. It Can Lead To Auto-Declines
Post-2020, location reporting inconsistencies led to auto-declines for business owners, including myself, despite my high credit score and profits. I fixed it through Experian Business, now helping others spot errors before applying. Early error detection avoids setbacks. Stay vigilant about credit. The time invested in maintenance will always be less than that required for post-factum fixes. - Richard Gusmano, Business Credit Consultants (BCCUSA)
2. It Will Result In Inaccurate Service
Inaccurate credit reports create financial, legal and compliance challenges by making it difficult to provide accurate service to both individuals and entities that require data from credit agencies for the creation of assets. However, financial entities also have the responsibility to adhere to the timely reporting of data because, as an ecosystem, all stakeholders must remain accountable. - Edoka Idoko, OjirehPrime Financial Services Limited
3. It Can Lower Lender Trust
A low credit score can have a significant impact on a small business's ability to thrive and expand by limiting viable options for financing. When lenders see a low score, they immediately think of missed payments or general mismanagement, which may not be the case. It's crucial for businesses to regularly monitor their credit reports and promptly address any inaccuracies that arise. - Lawrence Pross, Nexi
4. It May Impact Professional Deals
We see this all the time and cannot express how important it is to review your credit periodically. Sometimes, a spouse might not be honest with their spending habits and can kill deals all the time. The credit bureaus have a very difficult job maintaining perfection on everyone's report, and that is why more complaints are filed daily against them than anywhere else. - Bradley W Smith, Rescue One Financial and Simple Path Financial
5. It Can Lead To Missed Financing Opportunities
One client years ago had a 6% interest rate on their mortgage. Rates were down at 3.25%. A refi would have saved them a ton of money, and they could have had the house paid off in even less time than what was currently left on their current loan pre-refi. By the time they got their credit report accurate, rates had already gone up quite a bit. People really need to check monthly for accuracy. - Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
6. It Can Cause Planning Issues
Clients need to check their credit. By not doing so, there is an increased risk of credit events present on the report causing planning issues, even if they are not applicable to the client's situation. If an inaccurate credit event is not located and disputed promptly, it harms clients; necessary home loan or business line of credit approvals end up disallowed. - Brian Niksa, Capstone Financial Advisors, Inc.
7. It May Restrict Lending Options
Misreported credit data can deeply impact businesses when it comes to future expansion. It's critical to attack any inaccuracies head-on and proactively. Otherwise, it may restrict lending options when raising capital for growth opportunities. Businesses need to stay vigilant in case they want to borrow in the future. - Nick Chandi, Forwardly
8. It Can Affect Insurance Premiums
These issues represent both a challenge and an opportunity. Successfully navigating the dispute process can build trust and improve client relationships. Inaccuracies can affect insurance premiums, increasing operational costs. Businesses can mitigate these effects by regularly monitoring and disputing inaccuracies, educating clients about their rights and exploring alternative credit models. - Magdy Hassan Fayed, Forex Gump SRL
9. It May Impact Decision-Making And Advice Given
Inaccurate credit reports can hinder businesses and advisors from helping clients. They may impact decision-making, leading to financial setbacks. For advisors, reliance on flawed credit reports can result in misguided advice, affecting clients' financial well-being. Regular monitoring and rectification of inaccuracies are crucial for businesses and client welfare. - Richard Polgar, CFG Merchant Solutions
10. It Destroys Confidence And Stability
Erroneous credit reports disrupt operations and hurt clients' financial well-being. They impede financial access, destroy confidence and harm the brand. So we utilize credit monitoring and financial education to identify errors early on and emphasize the significance of regular credit checks. The goal is to help clients overcome these obstacles and attain financial stability and confidence. - Neil Anders, Trusted Rate, Inc.
11. It May Reduce Access To Credit Lines
In the digital age, credit report errors spread fast with significant impacts. Businesses must proactively address inaccuracies to protect their reputation and financial health, especially when seeking increased credit lines. Lenders favor businesses with a solid financial track record, underscoring the importance of accurate credit. We have been impacted by the amount of credit provided by credit cards. - JD Morris, RHC 21 LLC (a SPE Fund) with family of Special Purpose Entities (SPE or SPV)
12. It Hurts Financial Independence
It is our goal to put our clients in a position where they don’t need credit because they’re financially independent. But to get there, we often have to leverage credit along the way. Inaccurate credit reports hurt our client’s chances of achieving independence. So we leverage credit monitoring services to address this issue. - Todd Sixt, Strait & Sound Wealth Management LLC
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
