Credit Scores are flawed for small businesses. Will they ever fix the model?

[Anonymous]

Credit scores models are very lame. I own a small business. Our credit score wavers daily depending on loan and credit balances. It's extremely lame. I went to my bank to apply to increase our credit line.. we didn't even go to underwriting because they said our credit score was too low (average of 688). Why was it low? Because we design, stock and sell product. One day our accounts may show $130k out of $150k used. A week or month later it might be $2k out of $150k. It all depends on production cycles and sales. In order to increase our credit line we had to divert $36k in the middle of a production cycle in order to pay off $36k from our revolving accounts... simply so that the lame credit companies can take a dumb snapshot in time a month later so now our scores are 785. It cost me about $10k to divert this money simply for the lame scores.  Why do the credit score companies not look at the bigger picture? We do over $1M in sales and we're growing, who cares if wee have an extra $36k on our accounts one day versus the next? Anyone else have this issue w/ a single member LLC? What do you do?

[Anonymous]

Welcome to the forum, azone. I wish your arrival was under better circumstances, though. That sounds really frustrating.

I don't have any insights into your particular situation, but I can't help but wondering if the problem isn't more on your banker's part than on FICO's. It's not unusual at all for many kinds of business to have debt levels that vary widely thoughout the month. Perhaps you need a bank that knows what FICO score to read, when to read them, and perhaps most important, how to read the report that backs up the score and not just look at the number.

Anyway, sorry for your frustration.

[Anonymous]

The problem is that your bank is using your personal credit scores, not your business credit scores. Business credit scores are more stable and less subject to fluctuations based on credit line use.

[bada_bing]

Get a business credit card with Chase or Amex (or both)

After the initial HP to obtain the card, the utilization will not appear

on you your personal credit report (known as a hidden tradeline).

Keep your business and personal spending strictly separated.

If you are doing a $1M annual business on your personal credit cards,

you have been doing things incredibly wrong for several reasons. You should

never mix that level (or any level really) of business spend with personal

accounts. Bad practice you need to alter ASAP..