In 2005, Levi King received a generic rejection letter that floored him. It said his application for business financing for his sign manufacturing business was denied due to information on a credit report.

There had to be a mistake. He knew his personal credit was spotless.

After several calls to the lender, it was finally clarified that it wasn’t his personal credit reports that were the problem; it was his business credit.

Four weeks later,  he finally got his business credit report in his hands. It was loaded with egregious errors and made his business look like it was a high credit risk.

Statistics on Business Credit Report Mistakes

King’s story is just one example of business owners who are tripped up because of mistakes on their business credit reports.

In a Wall Street Journal research study, 25 percent of small business owners who checked their business credit reports found errors or omissions that put them in a riskier category. 

And these were just from business owners who checked their credit reports. 

Many never do.

That study was in 2013, though, and no comprehensive studies have taken place since then. In 2023 the FTC voted to launch an inquiry into the business credit reporting system, so we’ll likely have more information on the prevalence of business credit reporting errors in the future. 

In the meantime, it’s up to small business owners themselves to make sure they check their credit reports for errors, negative information, and to make sure they have a robust credit profile. After all, it’s not just negative information that can hurt your credit. A lack of accounts on your credit report can result in a low credit rating. 

The High Costs of Business Credit Report Errors

Mistakes on your business credit profile can be costly, and you may never fully know the repercussions. 

Lower business credit scores

If your business credit reports contain errors, any credit scores generated from that information will not be entirely accurate. (Whether mistakes result in lower credit scores depends on the type of information reported incorrectly.)  

Some lenders use FICO SBSS scores, a credit scoring model developed for small business decisions. (Certain SBA loans require the use of this score.) It takes into account business and personal credit data. If your business credit scores are low, your FICO SBSS score can suffer. 

Lost financing opportunities

Strong business credit reports and good business credit scores may help your business secure lucrative financing opportunities while bad business credit can hurt it. You may be denied financing due to information on your business credit reports and not know it. 

Higher interest rates on loans

Many lenders use interest rates to manage risk. A higher-risk borrower is often charged a higher interest rate. Your business credit can affect the interest rate you’ll pay on small business loans. (For many small business credit cards, lower personal credit scores can result in higher interest rates.) 

Higher insurance costs

If you’re shopping for business insurance, keep in mind that some insurers check business credit reports to approve insurance applications and/or to set rates. 

Hindered growth plans

Want to do business with a major corporate client? Look to partner on a lucrative contract? Those companies may check business credit before moving forward. 

Shorter Terms with Suppliers

Some suppliers offer credit that allows customers to buy now and pay later. Trade credit is big business: The Consumer Financial Protection Bureau estimates that small businesses with under $1 million in annual revenue used more than $50 billion in trade credit in 2019. 

Suppliers often check business credit rather than personal credit. Mistakes that make a business look more risky can affect the businesses’ ability to get terms with suppliers, or can result in shorter terms. Rather than net-30 terms or net-60 terms, for example, a business may be offered net-15 terms. 

Or you may not get credit at all, and be forced to pay for inventory upon delivery which can throw off your cash flow. 

Why Business Credit Mistakes Happen

Let’s look at three reasons why errors are so common on business credit reports and how you can defend yourself.

1. Free Reports Not Required

Unlike your consumer credit, your business reports are not covered by the Fair Credit and Reporting Act (FCRA).

This means that free credit reports are not required for businesses, the way they are for consumers. Other differences due to this lack of protection: 

• No formal process for disputing errors. The bureaus face no defined legal consequences for non-compliance.
• No permissible purpose is required. A company or individual can check on your business credit without your permission or knowledge.
• Rejection notices differ. If information in your business report is used against you (e.g., your supplier denies you a credit line), they are not always required to notify you. (Here’s what small business lenders have to tell you when you are turned down.) Negative errors on your reports could be costing you and you’d never know it.

2. Similar Business Names Can Cause Confusion

To populate a consumer report, credit bureaus look at four items: Social Security Number, Date of Birth, Address, and Name.  At least 3 of the 4 have to match.  This helps ensure that peoples’ profiles don’t get switched up.

When it comes to a business report, the bureaus may just match the business name and address. Neither one has to be exact.

As a result, it’s not uncommon for two business profiles to get mismatched. Imagine how easy it would be for franchises that all share a common DBA (ABN) name to get mixed up.

3. Creditors Are Not Identified

Most credit-report services guard the anonymity of sources that provide them with bill payment records, such as your suppliers, vendors and other customers. That’s why creditor names are not disclosed on business credit reports.It’s a lot harder to see if there are errors on your report if you can’t tell which creditor is doing the reporting.

Business credit reports also rarely list credit limits. 

How to Identify & Resolve Errors

Fixing business credit report discrepancies isn’t always easy. An SBA survey found that 23% of small business owners had difficulty disputing or correcting a mistake with a debt collector or credit reporting firm.

In Levi’s case, it took him months to sort out his business report errors with the bureaus. But once he did, he got approved for the loan he wanted.

Obtain Reports From Major Business Bureaus

The best strategy is to regularly check your reports for missing or inaccurate information. Each business credit reporting agency may have different information on file and they don’t share information with each other, so it’s helpful to check with multiple bureaus. 

While you’re at it, it’s also a good idea to check your personal credit reports. Many small business lenders also check personal credit and mistakes on those report could also hurt your small business. 

Review all accounts, inquiries, and account mix

The main factors that make up your personal credit scores are payment history, debt (including credit utilization), inquiries, account mix, and new credit. 

Business credit score formulas are generally more varied than consumer credit score formulas. All, though, are heavily based on payment history. So that’s the first thing you’ll want to look at when you review your reports. 

On business credit, you’ll see payment history listed as “Days Beyond Terms” or “DBT.” It refers to the number of days past the due date you paid the bill. If you have a net-30 account and you make your payment 5 days after the due date (or 35 days after the invoice date), it will likely be reported as 5DBT. 

While a late payment of a day or two isn’t likely to tank your scores, you’ll want to pay on time to build a good credit score. Set reminders or alerts, or automatic payments if they are available. It’s especially important to keep your payment history squeaky clean when you are trying to establish business credit, since your credit history will be thin (with few accounts).

Review inquiries if provided. These can help you understand who reviewed your credit file. If you see inquiries from companies you don’t recognize, dig a little to find out why. Unauthorized inquiries could be a sign of business identity theft, which is a growing problem.

You’ll also want to review UCC filings listed on your business credit reports. Creditors file UCC liens when they have an interest in the property of your business. Unfortunately, not all lenders file releases when the debt is satisfied, and this could make your business appear to have all its collateral pledged to other creditors. In turn, that can make it harder to qualify for financing. 

Here’s what to do if you find incorrect UCC filing information on your business credit reports. 

Create A Paper Trail

The process of fixing business credit mistakes isn’t as straightforward as it is with consumer credit reports but don’t let that discourage you 

If you find something negative on your credit report that is not accurate, here’s how to repair a delinquency on your business credit report. 

It’s a good idea to keep careful notes of any steps you take to resolve a dispute, including calls, emails or letters to creditors (who are often referred to as “furnishers” in the credit reporting world.) And keep records of calls, emails or letters to the credit bureau. This information may prove essential if your dispute isn’t resolved. 

Don’t overlook small mistakes

Something as simple as an incorrect SIC code or NAICS code (used to classify your business industry-type) can affect your credit score if it classifies your business as operating in a higher risk industry.

A wrong address on your report could indicate your business information is mixed up with another business with a similar name, which can also have repercussions. 

With regular monitoring, you’ll be alerted in real-time if anything changes on your reports. That way you’ll avoid any negative surprises down the road, and you can start the dispute process sooner, hopefully before wrong information hurts your business. 

How Nav Can Help

Nav is the only place to provide both personal and business detailed credit data from six reports. You can see your relevant credit information and how lenders and credit issuers evaluate your creditworthiness through Nav’s Detailed Credit Reports.

It’s an efficient and more cost-effective way to monitor your business and personal credit. You’ll also see information on financing that’s a fit based on your data. And with Nav Prime, you’ll get a tradeline that can help build business credit.

Over 100K small business owners this year used Nav’s Detailed Credit Reports with tradeline reporting. And the majority of customers that use Nav tradeline reporting at least 6 months continue to see positive business credit score changes*

Good credit helps contribute to good financial health. Whether it’s business or personal credit, you want to make sure you understand yours. 

Frequently Asked Questions 

What are the effects of errors on credit reports?

You’ve probably heard the term “garbage in, garbage out.” When it comes to credit reports, inaccuracies can affect your business credit scores. After all, credit scores are only as accurate as the information used to calculate them. 

How can a company’s credit report affect the business?

Mistakes on your credit reports can make it harder to qualify for credit, or result in higher interest rates. They can also make it harder or more expensive to get insurance. And for businesses, in particular, they can derail important business deals. 

Can a mistake on your credit report cost you money?

Incorrect information on credit reports can be costly when they result in higher interest rates, insurance rates, or loan denials. Since it’s hard to know whether a mistake you find on your credit report will cost you money, your best bet is to review your reports and correct them as soon as possible. 

How much does a business credit report cost?

Business credit reports are more expensive than consumer credit reports, and unlike personal credit reports, federal law doesn’t require credit bureaus to offer free copies. Each of the major credit bureaus offers different pricing to check your credit report, or the credit report of your customers, suppliers or other businesses. Learn more about ordering business credit reports here. 

*Based upon the aggregate percentage of Nav customers with positive score changes, nearly 70% of customers continue to see positive business credit score changes across business credit bureaus by keeping their Nav tradeline at least a year.