Debt Collection & Business Credit

For a business owner, your business credit rating is an important asset. Just like people, businesses sometimes have trouble paying their bills. This is especially true in the current economic environment. Commercial collection agencies like ours specialize in collecting on B2B debt. If your business is getting calls from a collection agency, you may wonder how this will affect your business credit.

Why Worry About Your Credit Rating?

Like personal debt, being sent to collections can affect your credit rating. Having a poor credit rating will affect your ability to borrow money in the future. It can also limit your choices of partners, vendors, and landlords and the credit terms they offer. We always advise clients to run credit reports on potential new clients. If you decide to sell your business, having a poor credit rating could affect your asking price. Depending on how your company is set up, and how the debt was incurred, business collections can also impact your personal credit rating.

How Do Credit Bureaus Learn About Your B2B Debt?

Banks, utility and credit card companies routinely update credit bureaus on your payment activity and outstanding debt. So do many vendors. Some companies belong to industry credit groups where they share even more credit information about their customers to minimize the chance of bad debt. This information provides the basis of your credit report. Collection agencies also have the option to report debts. Reports of being sent to collections or having outstanding judgments are big red flags for creditors and have a significant negative impact on credit ratings.

How Can You Protect Your Credit Rating?

The best strategy is to pay all of your bills on time. The longer you do this with higher amounts of credit the better your rating. If you can’t pay everything on time, don’t just hide from your creditor. While this strategy can buy a little time, it will hurt your credit rating. Be proactive to keep the debt being sent to a collection agency which has an even bigger negative impact. Try to work out a payment plan with your vendor.

If a collection agent calls you, don’t ignore it. Whether you owe the money or not, whether you can pay the debt or not, do not ignore the call. Ask for any information about the debt in writing. Keep careful records of any agreements or payment plans. If a collection agency falsely reports a debt to a credit bureau, file a dispute with the bureau. Then follow up with the agency to get the issue resolved. Make sure you are regularly checking your credit reports so that you can catch any incorrect issues. There are many resources for free ways to check your credit scores. You can get more advice about dealing with collection agencies in these articles.

Can Someone Owing Me Affect My Credit Rating?

Your credit rating is made up of both your payment history and your debt to credit ratio. If others owe your business money, it will not directly appear on your credit report. However, it will affect your cash flow. If you’re having cash flow issues, you are more likely to borrow money from banks, alternative finance sources, or credit cards. A higher usage of your available credit will negatively impact your credit rating. This is one of the reasons it’s important that you quickly resolve any of your customers unpaid invoices. Don’t let other people’s business problems become your problems. The sooner you take action, the higher the likelihood you’ll get paid and there will be less negative impact on your credit rating. We’re here to help in those problem situations.

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