Web Extra - Build and Repair Credit

Tips on how small business owners can build and repair credit

For some business owners, it is the lack of formal credit and not poor credit that bars them from accessing credit. It is estimated that up to 70 million have what are known as “thin files” with little or no formal credit history resulting in a zero, or “no hit” score. Not necessarily representative of borrower’s credit worthiness, “thin files” impede efforts to access credit.
This, coupled with the practice of many vendors to report only negative business credit transactions,  is why many businesses do not have extensive business credit.
Lending organizations such as ACCION work with many business owners like these, offering loans that help grow their business and build their credit.
How to build credit
There is hope for business owners lacking formal credit as credit bureaus and financial providers strive to capture more information such as utility payments and micro loans that can supplement a credit report.  Until then, how does one build traditional credit? One way is to apply for a secured credit card at a bank. Your limit is equal to the security deposit and is held for a set amount of time, generally around 18 months. Secured cards function in the same way that unsecured ones function, and, if you prove yourself a good borrower, you can usually later obtain an unsecured card.

Another option is to apply for a small personal loan through a lender that is more flexible, such as a credit union or micro-lender, like ACCION. Store charge cards are also generally easier to qualify for and can help build credit. The key is for your credit activity to be reported to the credit bureaus. Remember you have to use credit to have credit. Use it responsibly and do not go overboard applying for new credit.

How to repair credit

If you have mistakes in your credit report, such as inaccurately reported payments, write a letter to the credit bureaus and include a copy of an ID and any proof of the mistake. If you accessed your report online, errors can be reported there. Credit bureaus will respond in writing within 30 days.

For accounts past due or in collections, make a plan for getting up-to-date and paying off debts. Call your creditors to negotiate a settlement or a payment plan and get proof of payment in writing.  Most credit repair can be done yourself. Be weary of companies that promise to erase negative information or charge before delivering a service.

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