How to Improve Your Business’s Credit

Useful article i found for small business

By LYNETTE DENIKE, AllBusiness.com
Published: February 1, 2008

Why is business credit so important? It's the main way companies evaluate whether they want to do business with you, and on what terms.

History of SSN

President Roosevelt in 1932 came up with term Social Insurance which means: "To address the permanent problem of economic security for the elderly by creating a work-related, contributory system in which workers would provide for their own future economic security through taxes paid while employed". With this ideology in mind SOCIAL SECURITY ACT was signed into law by President Roosevelt on August 14, 1935.

PRESIDENTIAL STATEMENT SIGNING THE SOCIAL SECURITY ACT. AUGUST 14,1935

Part of the act was to established a Social Security Board (SSB). First task of this board was the need to register employers and workers by January 1, 1937, when workers would begin acquiring credits toward old-age insurance benefits. By deadline over 30 million SSN cards were issued through this early procedure, with the help of the post offices. By June 30, 1937, the SSB had established 151 field offices.

Social Security Number Chronology

SSN Timeline from Google

SSN evolved with above motto and now world revolves around it.

Few SSN timelines Related to Credit World:

• IRS adopted SSN in 1961
• Banks and Credit firms started adopting SSN from 1970
• Since 1982 all applicants for loans under any Federal loan program required to furnish their SSNs to the agency supplying the loan.

Experian Study Shows 30 Percent of U.S. Consumers Improved Their Credit Score Up to 50 Points in Six-Month Period

Experian’s National Score Index further finds 15 percent of consumers with a PLUS Score® between 600 and 649 in January 2007 increased their score by 50 to 100 points in June

Irvine, Calif., Oct. 16, 2007 — Three out of every 10 U.S. consumers improved their credit score by up to 50 points in a six-month period from January to June 2007, according to the latest National Score Index® study by Experian Consumer DirectSM, the leading provider of online direct-to-consumer credit reports, scores and monitoring products.

...read further at Experian website

Using Business Credit Reports

In my previous posts i talked about USA consumer bureau report contents. In this I will discuss USA business credit report content.

Major of the Reports come in two types:

1. Based on Trade Tape Data [Account Receivable Data]
   
2. Based on Financial Data

In both the reports firmograph [Company Name, Address, Company hierarchy information and key contacts at the company] data is common.

1. Based on Trade Tape Data:

 

Every small and big company does business among each other and all the bureaus collect this information from the companies willing to share. Industry term for this data is trade tape file. There is a some sort of industry standard reason every bureau does not want to share there trade secrets. Bureaus clean, collate and apply there so called secret logic to come up with a payment score. There are two types of score, one is called current score and second is predictive payment score based on the past and current data. More information on the score differences in the future blogs.  

Usually to buy bureau reports you need to be a contributor some of the bureaus do not insist on this. 

2. Based on Financial Data:

This is a straight forward report it contains a score derived from current and past financial and contains companies financial line items. Private companies that do not share financial to the world, secretly share with bureaus for their own well being. It is up to end company to trust private companies financial. For the public companies financial data is available freely on EDGAR database.

Credit Manager buy bureau reports based on there company risk policies. Usually all the credit managers do not make credit decision just based on bureau score. They do additionally analysis on top of the score. 

Give SSN or No and What does my report contain?

Employers, finance company, Insurance, landlord and others do not need SSN to pull your bureau report from any of the three [Experian, Equifax, Transunion] consumer bureaus. Your name and address is sufficient to find your report. Then why do above people request SSN, these is my assumption; just to confirm you are who you are. Report returned from the bureaus contains your SSN, current address and past addresses. If you provide incorrect information bureau report will flag.  If you give incorrect address or invalid first and last name bureaus will not return any report. Some times even if you gave right address/name and bureau did not return report that means they might not have your report.  Not every bureau will have your information and some time all three bureaus will have different scores [Depends on which credit card and loans you have]. Also note each bureau has better coverage in certain parts of the country and take note when you relocate.

What exactly does your report contain: Below are sections:

1. Section 1:   Name, Alias Names, Current Address, Past Addresses, Employer
   
2. Section 2: Profile Summary [public records, past due amount, number of inquires, number of accounts, total balance in the credit cards, total on all your credit cards, total mortgage amount]
   
3. Section 3: Your FICO score and score factors used [Request your lenders to explain this]
   
4. Section 4: Your open/closed/neutral trade lines [all open and closed credit cards, open and closed student loan, car loans, house loans and any back accounts]
   
5. Section 5: Information about who pulled your report. 
   
6. Section 6: Any flags either by homeland security or by other lenders
   

Every bureau bylaw is suppose to provide you a free copy of your report without a score, when you get your report make sure you look into section 4 [Trade Lines] and section 5 [Inquires]. Make sure all the opened credit card are yours and also make sure nobody is pulling your report without you knowing. My advice is to utilize this free report and make sure review your report once a year to avoid identity theft.

You can also call bureau and set a lock on your report, bureaus will lock your report and will not give away until you provide the approval. This is one extreme way of protecting your identity.  If you have done this then just have it unlocked before you go for a loan. 

In the next blog I will post few technical stuff on consumer reports.

Good Night

Using Consumer Credit Reports

Government [via Fair Credit Reporting Act] regulates how finance companies/insurers/land lords/employers/Bureaus access and provide your personal credit information.

Below are few links from Government WebSite

The Fair Credit Reporting Act regulates the collection, dissemination and use of consumer credit information. If your businesses uses credit reports to extend credit to your customers; as a pre-employment check for potential employers; or furnishes customer information to credit reporting agencies, there are rules and regulations you must follow to ensure privacy of credit information.

Emperor of Business Credit Data

• Make informed decisions when you access the world's largest source of commercial insight with over 100 million companies listed.
• D&B solutions allow you to effectively manage business relationships based on the D&B D-U-N-S number, the global standard for business identification.
• D&B has 165 years of experience creating credit management tools so that you can focus on your core business while we provide the right information to help you mitigate credit risk and increase cash flow.
• D&B's patented DUNSRight quality process helps you make informed, profitable decisions by ensuring that our data is high quality, consistent, and timely with over 2,000 continuously automated checks.

I will post more on them in my future blogs, read all the interesting facts about them, few are listed below:

• Database with over 100,000,000 companies.
• 639,000,000 payment experiences updated annually.

Stop & Shop reports credit data was stolen

How could this happen? stop and shop employee or the employee from the company which services have access to these machines... thieves are using more and more hi-tech methods to cheat the system.

With help from US Secret Service agents, Stop & Shop Supermarket Cos. executives scrambled yesterday to determine how many consumers may have had their credit and debit card data stolen by high-tech thieves who apparently broke into checkout-line card readers and planted the equivalent of bugs to steal information.

Must for Risk Decision Makers and Risk Software Vendors

FICO 8.0....

Banks do not just rely on FICO score alone to give credit to their customers, everybody knows to get a good rates they evaluate more. Now why would banks in case of subprime borrowers they just rely on FICO score...when i am giving out money i would be extra careful...anyhow all the three consumer bureaus are upgrading the FICO score basically fine tuning:

model will continue to look at the same factors, including consumers' level of credit indebtedness and payment histories, length of credit histories, number of recent credit openings and inquiries, and the type of credit used, to determine scores.

But the new model will more finely slice and dice the information in consumers' credit files to do a better job of separating the "good risks" from the "bad risks," particularly for subprime borrowers; those with "thin," or young, credit files; or consumers who are actively seeking new credit. "Those are the communities that lenders are most interested in" to determine credit risk, says Craig Watts, spokesman for Fair Isaac.

below link you can download PDF version explaining everything about your credit score.

Understanding your credit score

Better "early" than late!

Welcome to my first blog. I’m late by six years, I am going to get over the ignorance of blogging and not think about what people would say about me or my opinions.

I will try to blog daily, let us see how long will this go.  I will write about credit world, both business and consumer side. Will talk about current practices and touch what future holds in credit world. I will also discuss things that I do not know.