Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com. Her book, “The Million-Dollar, One-Person Business,” was released in 2018. She writes “Your Business Credit,” a weekly column about small business and credit, for CreditCards.com.
Can small businesses report delinquent customers’ information to a credit bureau?
It is possible to report information to a credit bureau, but generally small businesses must meet certain criteria in order to become “data furnishers.” If your business is too small, this might not be a practical solution.
When dealing with a delinquent customer, other options may include enlisting a collection agency to seek repayment.
Dear Your Business Credit,
I’m a small-business owner. We extended credit to a customer, and now he hasn’t paid us for months.
Can I report this information to a credit bureau? – Samantha
It is possible to report information to a credit bureau, but generally it is not practical unless you’re running a larger small business, because of the requirements to become a “data furnisher” to the major credit bureaus.
It can take a lot of time, and you will need to meet a minimum number of transactions.
See related:Who can furnish payment info to credit bureaus?
How to become a data furnisher
To become a data furnisher, you first have to apply. You will have to gather information such as your business license or articles of incorporation, which can take a little time if you do not have them handy, and fill out some paperwork.
There are also many regulatory requirements to actually furnishing the data, such as verifying that the customer is in a legitimate business.
To give you an example, here are TransUnion’s reporting requirements, according to the bureau’s website:
Generally, items required for credentialing the prospective customer include:
- Letter of intent
- Third-party verification of business credentials (for example, bank and trade references, proof of lender sponsorship)
- Business or other license
- On-site inspection
TransUnion also explains that the credentialing process may include, but is not limited to:
- Verifying the business identity of the applicant (via business and/or personal credit reports, lease verification, for example).
- Obtaining certifications regarding the applicant’s nature of business and purposes for obtaining TransUnion products and services (via applicable service agreement).
- Verifying that the applicant is a legitimate business engaged in the business certified by the applicant (via reputable listings, website review, for example).
- Determining if the applicant has a permissible purpose in cases where the applicant wishes to obtain consumer reports.
- Performing an on-site inspection of the applicant’s business premises is generally required if personally identifiable consumer information is being sought.
There are also technical requirements at TransUnion, such as a type of software called Metro 2 and a minimum of 100 accounts to start reporting.
D&B has a different application process to join its Global Trade Exchange Program. Here, again, you must demonstrate you have a minimum number of accounts to join, in this case 300.
Where to apply to become a data furnisher
What if you do enough business volume to make it worthwhile to become a data furnisher? Here are links to the pages where you can apply:
Benefits of becoming a data furnisher
If your business is large enough to become a data furnisher, you’ll be doing your fellow business owners a valuable service.
You may save them from doing business with a customer with no intentions of paying them for their products or services.
As TransUnion, one of the major credit bureaus, says on its website, “Accessible credit information enables all kinds of businesses to make informed decisions when extending credit, making promotional offers and facilitating a wide range of other activity that is essential to a healthy market economy. ”
This credit information, TransUnion explains, is based on the “billions of updates we receive each month from auto dealers and finance companies, banks, credit unions, mortgage companies, retailers, student loan providers, public records and more – for virtually every market-active adult in the United States.”
Tip: If a personal loan or payment has gone delinquent, some debt collectors will take on small jobs. Read “Hiring a debt collector to enforce loan to friend, family” to learn more.
Alternatives to reporting a delinquent small-business owner to credit bureaus
Given that you wrote to me about a late-paying customer, I’d suggest that, if you run a very small or average-sized business, you try other remedies.
If you’ve already invoiced the customer at regular intervals, consider enlisting a collection agency or court remedies.
Reporting to a credit bureau would not be the best route to getting paid in this instance, since it may not be an option available to you.