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You are here: Home / 2010 / Archives for March 2010

Archives for March 2010

Having Problems Understanding Credit Scores?

March 25, 2010 By Marco Carbajo

Understanding credit scores

Understanding Credit Scores

Recently Corporate Experian made history by unveiling the industry’s first ever Triple Score Business Report. While this clearly marks the beginning of a new trend in business credit scoring I’m curious to see if there will be another business credit bureau that introduces its own version of a triple score business report.

Credit scoring is big business and companies like FICO have been providing its risk assessment technology for years. What really matters is whether or not lenders decide to use one specific platform over another and clearly your FICO score is the choice among most. Or is it?

When it comes to business credit scores each bureau uses its own internal scoring formula. When a lender pulls a business credit file the bureau provides a score. DNB’s score is called paydex while Experian has intelliscore and Small Business Equifax uses a Small Business Credit Risk Score.

It may come as a surprise to you but currently there is no leading business credit scoring system used in the lending industry today.

As a result lenders use FICO as another risk assessment tool in making its business lending decisions along with business credit scores. But will this strategy soon change?

I’m sure you’re aware that the three consumer credit bureaus, Equifax, Experian and Transunion formed Vantage Score Solutions as a joint venture in 2006 to offer choice and competition in the credit score marketplace.

FICO responded with a lawsuit against the credit bureaus for trademark infringement which I covered in my post FICO vs. Credit Bureaus. It was no surprise that Vantage Score Solutions had a complete legal victory over FICO in this lawsuit.

It was interesting to read Vantage Score’s President and CEO Barrett Burns’ congressional testimony on understanding credit scores yesterday. It was evident that he wanted to show the advantages that Vantage Score provides over all other scoring models.

In particular he was addressing segments of the population who has a hard time obtaining credit because they are unable to have a credit score calculated with the current scoring models.

This was broken down into the following categories:

1.     Consumers who have less than three accounts in their credit file are considered to have a ‘Thin File’. Between 35 and 50 million consumers in the United States – 18 to 25 percent of the adult population – may be considered thin file; and, therefore, often underserved;

2.   Infrequent credit users, who may not be eligible for a credit score because there has not been new activity on any credit account for six months; and,

3.   New consumer profiles that are just establishing credit relationships and have not had credit open for more than the six months which is required by some of the traditional scoring models.

What was exciting was the Vantage Score model showed an 8 percent increase in credit scores for 10 million consumers after doing a random score check. What’s even more impressive was 2.5 million consumers from that study were considered a much higher credit quality than subprime.

Since Vantage Score was introduced they have made some significant gains in the marketplace that not only benefits consumers but also small business owners as well. Here is a quick overview of the lenders now using Vantage Score:

  • 4 of the top 5 financial institutions
  • 8 of the top 10 credit card issuers
  • 3 of the top 10 mortgage originators
  • 7 of the top 50 auto lenders

With literally hundreds of credit scores and scoring models used by lenders it’s important for you to be fully aware of where you and your business stand across the most widely used models. Be sure to check your FICO score , Vantage Score, Paydex Score, Intelliscore and Small Business Credit Risk Score so you can be fully prepared when applying for financing.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

To Your Success In Business and in Life!

Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook and Twitter.

About the author

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com,  have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.

Filed Under: Consumer Credit Tagged With: credit score calculated, understanding credit score, understanding credit scores, your fico score

Smart Business, Stupid Business: Interview with New York Times Best Seller Diane Kennedy

March 22, 2010 By Marco Carbajo

Smart Business, Stupid Business

 

Smart Business Stupid BusinessRecently, I spoke with my good friend and New York Times Best Seller Diane Kennedy about her brand new book ‘Smart Business, Stupid Business’.  She offers excellent insight into the $40 billion dollar problem that puts most small business owners out of business.

Here’s part of the interview I did with Diane Kennedy.

What inspired you to write this book?

Many people have come to realize that having their own business means the only real control they can have over their financial future. The number of new home-based businesses has sky-rocketed. Yet, there is very little training and information available about what you need to know to run your business from a tax, accounting and legal perspective.

How did you come up with the title?

Everyday a business owner stands at a crossroads. They can have a smart business or a stupid business. A stupid business fails, on average, in less than 5 years. A smart business grows, and touches lives in positive ways. A smart business owner knows how to read important stats on his business, stand up to an IRS audit and stop employee theft cold!

What was one of the most surprising things you learned in creating Smart Business, Stupid Business?

I was shocked to learn that somewhere between $400 billion – $600 billion is stolen by employees every year. It’s the single biggest reason that businesses fail! Yet, there are some very simple things that business owners can do that cost little or no money and that will dramatically reduce the risk of employee embezzlement.

These are the type of strategies that smart business owners can put into place today and that they’d know about if they only had the time and resources to study up on all the financial, accounting, tax, and legal information they needed.

What is a word of advice that you have for small business owners operating as sole proprietors?

In one word: DON’T!!

There are 4 reasons to RUN away from the Sole Proprietorship for your business:

(1) you put everything you own personally at risk.
(2) You will pay an extra 15.3% tax on income from the business.
(3) You can’t build business credit.
(4) You have a 1 in 3 chance of an IRS audit.

I can’t think of a single reason why you SHOULD have a Sole Proprietorship.

Of the books that you have written, which is your favorite?

Without a doubt, “Smart Business, Stupid Business” has been my favorite.

Let’s face it; we’re in a deep recession. A lot of people have lost their homes, their investments, their pension and their jobs. And they know the only way to brighten their financial future is by taking charge. And, that means starting their own business.

But then what? Most businesses fail in the first 5 years.

But it doesn’t have to be like that. There are things you can do to protect your assets, create cash flow quick, find loans, build value, turn lazy assets into income, protect against employee theft, create systems that work so you don’t have to and learn how to foretell your business’s financial future.

My other books were about taxes and I love that, but it’s only one part of having a business. In “Smart Business, Stupid Business”, it’s about taxes PLUS all the other things a Smart Business Owner needs today.

I believe that Smart Business Owners are the only thing that can save this economy. I’m proud to give them a little help with some quick and easy tools to make their business stronger.

I want to thank Diane for this interview and I highly recommend this book for every business owner. The timing and the message couldn’t get any better!

To listen to my Eights Steps to Ulimate Business Credit seminar hosted by none other than my good friend Diane Kennedy submit your name and email below for details and receive this free audio seminar ($597 value) =>

 

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  Follow Marco on Twitter @MarcoCarbajo and read more of his insights on building small business credit.

Filed Under: Business Credit Tagged With: diane kennedy, diane kennedy cpa, smart business credit, smart business stupid business, sole proprietorship

Business Credit Insiders Circle -What Can I Expect?

March 20, 2010 By Marco Carbajo

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Filed Under: Business Credit

How to Establish Business Credit with a Reporting Bank Loan

March 18, 2010 By Marco Carbajo

Establish Business Credit with Bank LoanEstablish Business Credit with a Bank Loan

 

When you build business credit nothing looks more powerful on your business credit file than a business loan. The reason behind this is because lenders and creditors know how difficult it can be and the level of scrutiny your business undergoes in order to get a bank loan approval.

While the majority banks are declining loan applications you’re probably wondering how you can possibly get approved for a business loan.

Well I have good news for you because there is a sure fire way to establish business credit with a reporting bank loan even if you are Startup Company with less than perfect credit.

So what is this sure fire bank loan strategy?

It’s called the CD secured bank loan and provides a powerful way to establish corporate credit and bank credit for your business.

So how does it work?

Basically you are securing a loan with a certificate of deposit at the bank willing to offer this type of business loan. You make a deposit into a CD account at a bank that’s SBA approved and your business loan will match 100% of the value of the CD.

When you apply for these loans make sure the exact name of your company is on the application along with your Federal Tax ID. Banks will report your payment history on this loan to Small Business Equifax and Corporate Experian.

Now keep in mind not all banks offer these types of loans and the ones that do will require a minimum loan amount which is typically $5,000. When you have a bank loan that reports on your business credit files you can establish business credit scores and profiles that will enable your business to obtain the cash financing it needs.

Not too long ago I covered how to build a strong business credit file by having the right blend of credit. By adding a reporting bank loan along with vendor credit lines and revolving credit you can imagine how this will look in the eyes of lenders and creditors when they view your file.

Adding a bank loan on your file also helps categorize your file with other businesses with bank loans as well. This will help when creditors and lenders purchase lists from the business credit bureaus for marketing pre solicited credit offers.

This strategy works as long as your personal credit scores are in the mid 600 range. If your scores are low then you may want to consider speaking with a local banker or even use the transfer of ownership strategy.

Once you secure the $5,000 or more you can always deposit the money from the loan and use it exclusively to re-pay itself. Remember your money is in a CD earning interest so it’s best to keep making your loan payments for at least 12 months before paying it in full. If you pay your loan off in a couple of months you will not build enough payment history with the bank and your credit file.

This strategy will help your business establish corporate credit and qualify for offers like pre approved no pg business credit cards.

To access banking contacts that provide CD secured loans consider joining my Business Credit Insiders Circle and add a bank loan to your business credit file today!

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

 

Marco CarbajoMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Filed Under: Business Credit Tagged With: business credit cards, establish business credit, establish business credit score, establish corporate credit

Experian Triple Score Business Report Product Review

March 15, 2010 By Marco Carbajo

Experian Triple Score Business Report

 

sp_image-443351261-1243480836.gifIn a press release today Experian makes a strategic move by announcing the industry’s first online triple score business report available from three business credit bureaus in a single report. 

It’s no surprise that Experian is utilizing the first mover’s advantage by offering a service like this for business owners which is similar to the tri-merge credit score reports that consumers have been able to purchase for years.

While the scores in the triple score business report are provided in a simple letter graded format from A through E with A being the lowest possible risk to E being the highest risk the report itself provides more of a broad assessment rather than a detailed one.

For example, the D&B score provided in the Triple Score Business Report by Experian is not your actual paydex score but rather a predictive score which measures the risk of severe delinquency over the next 12 months. 

Another letter graded score in the report is based on the Oxxford Business Report which derives its information and risk assessment from broader issues and data but not from the business itself.  Instead it reviews the industry risk, classification, and the potential for a business like yours to have delinquent payments within the next couple of years.

While I can appreciate the idea of making it easier for business owners and creditors alike to review business credit scores in a single and easy to read format I would like to have seen the triple score business report include Small Business Equifax plus the actual scores rather than Experian’s letter graded system.

To take it a step further what I think would take the business credit reporting industry to another level would be introducing a tri merged business credit report with scores from all three major business credit bureaus – Corporate Experian, Equifax Small Business and Dun & Bradstreet.

Now that would be a report that business credit lenders and banks would take advantage of. This would also open up much more opportunities for businesses to obtain financing based on their company’s creditworthiness rather than their personal credit scores.

Today, lenders have limited access to tools that provide a complete overall risk assessment for a business. Instead they pull a single business credit report for the company and pull a merged file report with scores on the business owner.

Unfortunately business lending decisions are driven more by consumer credit reports than business reports which should not be the case.

Doesn’t it make sense that if lenders look to extend credit to you as a consumer they pull a tri merged credit report with all three scores to assess the risk. Why don’t lenders have the same type of tri merged reports and scores to assess the creditworthiness of a business?

While Experian is first to move into the right direction with its triple credit score business report I think it needs to go back to the drawing board and introduce a tri merged business credit report with actual scores from the three main business credit bureaus.

The Triple Score Business Report is available for $29.95 and you can also order a complete Experian smart business report for $49.95.

To your Business Credit Success!

To access business credit insider secrets, premium vendors, leasing companies, business credit cards with no pg, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

 

sp_image-435950341-1242740704.pjpegMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. He is a corporate credit blogger for All Business.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Filed Under: Business Credit Tagged With: experian business report, experian smart business report, experian triple score business report, triple score business report

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