How Long Will it Take for my Business Credit Score to Bounce Back after Settling Debts?

October 29, 2014
Ashlee Hyden

Businesses seldom incur major credit damage from large purchases because they properly position their finances beforehand. In addition, the contentious business consistently monitors its D&B or Experian credit file for any problems that could manifest with vendors, suppliers or others entities that it relies on to extend credit.

But, it’s important to remember that even minor credit damage can impact a credit score. When credit damage does occur due to late payments or past due accounts that warrant action from collection agencies, it normally takes 7.5 years for the damage to clear from a credit report. At this point, most businesses begin seeking alternatives that can hopefully lessen that time.

Although time heals all wounds, 7.5 years is a long time to wait. So, are there faster ways to get collections and late pays removed from a credit report? The short answer is, sometimes. The long answer is, it depends on a number of factors.

For businesses, the challenge really starts before the problem occurs. Business owners need to switch from using a personal credit and checking account to one that is exclusively for their business. Secondly, they should familiarize themselves with how business credit ratings are evaluated. D&B, for example, maintains 150 factors that make up a credit rating, such as industry, revenues and number of employees.

If you find an inaccurate or false item on your business’s credit file, you can eventually get this item retracted. This process takes persistence and a solid paper trail proving that a mistake has been made. You can send your disputes in writing with supporting documentation (copies of the correct transactions with the vendor or loan entity) to have inaccuracy or false item fixed.

If your business has a legitimate debt, the only way to get it removed is to pay it in full or negotiate a reduced payment. Ideally, you should be communicating with your vendors and suppliers before a problem occurs so that if and when it does occur, you can work with them to come to payment terms without it going to collections. In the case of a bank loan, there is often little to no leeway in negotiations, which means that non-payment will eventually lead to legal action.

Your business’s ability to pay off any debt is still a matter of time and financing. The more and the faster you can pay, the quicker the third party vendor or supplier will provide the documentation you need to remove the negative information from your business’s credit file. Ultimately, there are no shortcuts to a good credit rating for your business other than diligence, planning, spending limits and communication with those businesses that extend you credit.

Lex Patterson, CEO DAKCS Software SystemsLex Patterson joined the DAKCS team in 1988. In 2006, he was named President and has worked to cultivate new markets, enhance product offerings, connect people, cut costs, and further DAKCS’ legacy of delivering astonishing customer service. He has a deep interest in technology and the ARM business, but understands that the relationships developed through interaction with people are really how business gets done. An avid fly fisherman, photographer and motorcycle enthusiast, Lex enjoys the great Utah outdoors.

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