CREDIT REPORT BUYERS/PURCHASERS NEED TO KNOW THEIR RIGHTS AND OPTIONS

Over the past 40+ years it has become evident – especially recently – that many credit managers/buyers of credit reports have become complacent and far too accepting of mediocre credit report quality – they seldom complain and seldon insist on better quality of investigations and information. ( the writers note aside – could it be that the extra charges the agencys levy for proper correct current investigations are impacting this?) This frankly is to their peril, as the information they use has a huge impact on the credit decisions they are making.

A credit report buyer has "rights" and should exercise them frequently. Those rights are:

1.To insist on when the data/information in the report was aquired and when it was actually confirmed – on what date and through what means.

2.To insist if they are ordering/buying a "complete" credit report that all required areas of information on the business are covered. That being said those areas mean the following:

Correct legal name of the business

Correct current address of the business

Correct contact numbers such as phone, fax, email etc

Correct number of employees

Correct square meterage/footage of the occupised premises

Correct sales volume figures

Number of years the business has been in business – date started

A complete description of what the business does – trade it sells to – trading area it sells in – products it sells/services

Trade payments experiences – date they were obtained – actual number of
trade experiences, the actual "high credits" – how do those "high credits" compare/relate to the amount the customer is asking for a line of credit. If the report does not contain a minimum of four current experiences it should be rejected and a reinvestigation should be done at no charge to the buyer.

Correct number of "legal actions" (with assurance they are actually against said business) and not close matches. Details such as names of the defendant and the plaintiff, the amount of the action, is it being defended or not.

Actual number of "accounts placed for collection" with similar details to legal actions included.

Correct background and work history on the principals/owners going back at minimum of fourteen years.



If all of those requirements are not met then frankly you are not buying a credit report.


That does not mean to say, that in every case, every customer that amount of information is needed – the amount of credit exposure you are considering may be very small, and perhaps less information is needed – but if so, the price you pay for lesser amounts of information must drop accordingly, and plelase do not fool your self that you are using a complete credit report.

There are many options for purchasing credit information in limited sizes, mainly those reports are called:

trade payment reports

history reports

legal reports

credit score reports

consumer/personal reports

predictive score reports.

Let’s explore briefly what each of the above reports normally contains and are they a good buy or not.

Trade Payment Reports:

These reports generally focus on trade payment experiences – and in so doing, normally have more trade experiences and "higher credits" than the general purpose full credit reports – simply because that is what they do and are generally good at it.

In some cases the trade payment report will have correct demographic information plus indications of legal actions, collections etc. These reports are a good buy, esepcaily for credit grantors making quick low dollar decisions. Prices vary around the world.

History Reports:

Generally "history reports" include a brief summary of the principals/owners business expereince and education, detailing often times, other relationships they may have or had with other companies including companies they may have been in that failed. The history report should include specific details on the particular companys history, including incorporation date, dated commenced etc, and details as to whether the company is an outgrowth of a former business/company.

Generally these reports are used, less so for serious credit granting decisions and more for acquisitions, merges etc.

Legal Reports:

Legal reports are essentially what the name implies, though at times the real content is less that expected. A legal report should contain all of the legal history on a business, including all court/legal actions registered against the busines, with special care taken that the business name on the action is exactly the same as the one you are requesting – far too often close names are included which makes for very unfair and inaccurate decision making. Details specifically on the action must be there, i.e. plaintiffs name, defendants name, date action registeredd, specific dollar amount, and "reason for the action" - i.e. is it an insurance claim, is it for goods / services sold and delivered or perhaps employment dismisal related.

Reports of this kind are available, but, a word of warning, it is not suggested any legal report is "all encompanssing" and should be taken in to consideration with all other information on the subject gathered.

Credit Score Reports:

Comments here will encompass all score reports and their prolifereation in to the market in the past fifteen years.

Score reports can be a useful tool, but, only and we repeat only if there is depth and quality of informtion used to drive the score. Far too often one encounters "scores" such as "payment scores" with one or two or at best three trade experiences which are generally old and not representative of the size of the buisness being scored. This can and will be a costly mistake on the part of the user, if they do not investigate what information comprises the score.

There are scoring systems and algorithms driven to reflect where the score number is high, but, actually the implied credit worthiness of the business is terribly low, and the reverse, so getting a complete understanding from the information provider as to how scores are arrived at,on what basis etc is vitally important.

Generally credit score reports are sold at a very low ticket price – which generally implies they are "data base" "ready to use" reports – very good if you do your homeworkd and check on the validity of the score.


Consumer/Personal Reports:

Our experience is that generally in north america, consumer/personal reports contain far more pertinent and comprehensive data than their business reports counterparts. The reason being is, the two/three major consumer beaureaus have been very successful in getting the co-operations and input from 99% of the consumer credit granting community in canada and the usa.

Therefore it is seldom that much pertinent information is missed.

Generally the consumer products in north america are quite sound and reliable. One should always though, question and review the report with the applicant, to ensure the data is up to date and relevant with no miss matched information included in a report.

Prices due to heavy competition in north america are quite low and reasonably priced.

Predictive Score Reports:

Due to the fact that "predictive scores" are generally derived from "score reports" we refer you to the section on "score reports" and invite you to follow that same line of thinking. Caution is very important, depth and quantity of information is vital and if not there can be extremely misleading. The should be, how can scores, based on inadqueate data ever be relied upon to "predict" the future of a business or more importantly your customer. Frightening to say the least.

A word on credit reporting agencys: therer are numerous global credit information agencys – some of whom have been around for years and years – a thought might be to question your marketing sales representatives as to where their particular agency is going in terms of actuall investment in their companys investigation dollars spent, say compared back over the past five years –a good quesiton to ask. Another question may be – what is their companys strategy in terms of acquiring information – do they rely totally on the internet, and they unverified input from the business they are reporting on or do they actually have human beings gathering and seriously reading and verifying their information.

Whatever means, whatever method your company and your department use, we respect the fact you are using thought, money and capital to manage your accounts receivable and credit risk. Use it wisely, as it is "your thought, money and capital" and is vitally important to managing the capital of your business.