Fair scoring for small business owners

[Anonymous]

I own a small business, and many of my accounts are either joint or personally guaranteed business loans. As a "normal" consumer one would likely never use this much credit, and it seems I have a lower than average score. I haven't a single late payment in 20 years, yet if all lenders do is screen by the FICO score, I am sometimes denied credit or charged higher rates.

The common practice of randomly auditing credit scores and increasing your interest rate on accounts - seems almost illegal or at least predatory. Is there any protection for consumers against this practice? If I have NO late payments, have ALWAYS payed early and more than the minimums (often paying off accounts several times over the years), why is it acceptable to raise my rates 5%-10% based on an arbitrary scoring system DESIGNED FOR INDIVIDUALS?

I'm well acquainted with how the FICO scores are calculated, and how they are weighted to reflect credit risk...for the AVERAGE CONSUMER. What can be done about treating small business owners fairly? Why can't there be an account type for business credit, and some allowance made for business income? Only large, well-established corporations can obtain credit without personal guarantees of some kind.

Very interested if anyone has found a way to work with this lopsided system....

Thanks.

[Tuscani]

A credit educated business owner will know how to separate biz and personal credit. DnB dominates the biz world, but EX and EQ both offer business reports as well.

In all honestly, there is no reason to have to personal guarantee any business credit if you are willing to take the time to establish your biz credit.

Message Edited by Tuscani on 06-11-2007 09:22 PM

[Anonymous]

Sorry, but that is a bit of a non-answer. It takes years to establish business credit (I have been in business about 3.5 years now), and in the meantime there is not much ability to get loans without signing personally. While I have trade references, some business credit, and a good D&B file, it will be several more years until I can move all of that off my personal file (or pay it all down).

While this process of credit building goes on, small business owners are basically preyed upon by banks and insurance companies if they happen to have debt carried from the business - costing us thousands in lost opportunities and finance charges. While I have 20 years of perfect payment histories on over 40 accounts, multiple completed car loans and mortgages...my score is low due to balances they catagorize as "revolving". Several companies checked my score, and raised my rates on two of my lines from 7.9% to 17.9% and 23.9%! This happened when my score dipped below 640 or so for a time - not due to any action on my part.

My beef is with the one-formula-fits-all approach to scoring, and that the scores have become such a HUGE factor in everything we do. Banks, insurance companies, landlords, etc have all delegated to FICO to tell them how much to charge people for everything. Many don't look at income or any other aspect of the credit file - just the score. And the business of collecting money from the consumer to access and try to manage the "secret numbers" is generating millions.

If FICO puts an owner-guaranteed business loan in the same catagory as a charged up credit card used to buy personal goods...no wonder the system doesn't work the way it should, for the consumers OR for the lenders.

[MM1234]

I can help here cause i was in the same boat. I can tell you smbizowner that if you dont have a biz that deals with other Biz's that report to D&B it will be hard to get credit just in the Biz name. If you have a good PAYDEX score of 80+ and a fat report with some big companies reporting then maybe you'll get some love. And in the biz world, vendors are not required to report. You can ask them too but thats not good to do. Oh - D&B will also offer a service to contact them to ask them to report but I dont want anyone calling my vendors to try and force them to report.

I've owned my own biz for like 6 yrs and only this year was a I able to get real Credit in the Biz name and that took all kinds of hoops.

I spoke to the D&B guy and he said if you really want to apply for BIZ Credit, when they ask you for your SSN simply put your D&B # or your EIN #. He said if still insist on your SSN, then its not going to be REAL Biz Credit. So it really is hard !!!

[Tuscani]

I wouldn't say years... I had an 80 paydex and a 95 EX biz score in under 6 months. You just have to know how to play the game.

[Anonymous]

Well, Tuscani? Fess up - what methods did you use? That's what I'm after is tips for working up sufficient business credit to get it off of my personal file (p[lus some venting about how unfair personal scoring is to those of us that still have mixed credit files).

I had the same experience with D&B - they will charge you $500 to call and bug your vendors to report, but it is usually a complete waste of money. Are you in a line of business that suppliers report more readily? I am a mid-sized physical retail store, and run many thousands a week through my suppliers...and yet can't get a bank to not want a personal guarantee. Three years in business, spotless payment history.

"Knowing how to play the game" doesn't help unless you share!

Thanks,

sbo

[Tuscani]

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smbizowner wrote:

Well, Tuscani? Fess up - what methods did you use? That's what I'm after is tips for working up sufficient business credit to get it off of my personal file (p[lus some venting about how unfair personal scoring is to those of us that still have mixed credit files).

I had the same experience with D&B - they will charge you $500 to call and bug your vendors to report, but it is usually a complete waste of money. Are you in a line of business that suppliers report more readily? I am a mid-sized physical retail store, and run many thousands a week through my suppliers...and yet can't get a bank to not want a personal guarantee. Three years in business, spotless payment history.

"Knowing how to play the game" doesn't help unless you share!

Thanks,

sbo

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This isn't a biz credit building forum. PM me your e-mail I will send you some info.

PS... You NEVER have to pay DnB to get a paydex. They of course will tell you otherwise in an attempt to extort money out of you.

[Anonymous]

How do I play to game of getting a paydex score I already have a staples account with a 750.00 credit limted DB wants 549.00 so I can have a paydex score. is their anyway around this.I need help in getting the credit I need for my business Please Help Thank you

[Red1Blue]

Hi smbizowner, I know how you feel. I went through the same feelings. It is very easy to setup biz credit. 

I have established 15 business trade lines in less than 3 months and my paydex is 80 and Exp is 92. It is very easy to build business credit seperate from personal credit.

Send me a PM and I can help you out in building business credit with out personal gurarantee. You dont even need to provide your SSNo to Creditors or on the application when you are doing this.

[Red1Blue]

doclove63, send me a PM and I can help you out. I have built 15 Tradelines with a total line of 35K in less than 3 months.