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This Credit Application Language Can Help With Delinquent Accounts

posted on 2014-04-17 by Dean Kaplan

 

Get­ting per­mis­sion to run per­sonal credit reports on B2B Credit Appli­ca­tions can lead to pay­ments dur­ing dif­fi­cult times

At our com­mer­cial col­lec­tion agency, we often encounter busi­ness own­ers who claim their company’s finan­cial con­di­tion is ter­ri­ble and they can’t pay any­thing or can make only small pay­ments. It is dif­fi­cult to ver­ify this infor­ma­tion on a pri­vate cor­po­ra­tion or LLC unless the debtor vol­un­tar­ily pro­vides com­pany finan­cial state­ments. But, if we have per­mis­sion to run a per­sonal credit report, the report can give us many clues as to how best to resolve the matter.

If the report shows the owner has a stel­lar credit rat­ing and large untapped bal­ances on credit cards, we can nego­ti­ate to get them to bor­row from the card issuer instead of our client. Even though they don’t have a legal oblig­a­tion to use per­sonal assets to pay com­pany debts, if they aren't will­ing to do this when we have this knowl­edge, it impacts the deci­sions we and our clients 

have to make dur­ing the debt col­lec­tion process.

Alter­na­tively, if their credit cards are maxed out or there are numer­ous credit issues, we know the debtor could be on the verge of not hav­ing the funds to keep things going. At that point we ask our clients to con­sider set­tling for a sig­nif­i­cant dis­count to at least get some­thing before it is too late or agree to small pay­ments if that is the best we can negotiate.

By law, we have to have writ­ten per­mis­sion to run a per­sonal credit report. That is often dif­fi­cult to get once an account has entered col­lec­tions. We do not have this writ­ten per­mis­sion on most of the claims we receive, which prompted me to start a dis­cus­sion on LinkedIn. I asked if any­one was includ­ing this per­mis­sion state­ment on their credit appli­ca­tions and sev­eral peo­ple responded in the affir­ma­tive. Many were kind enough to share spe­cific lan­guage for other pro­fes­sion­als to con­sider. Here are some examples:

  • the under­signed con­sents to cred­i­tor obtain­ing a con­sumer credit report on the above listed owner, part­ner, offi­cer, or guar­an­tor of the cor­po­ra­tion, LLC, pro­pri­etor­ship, or part­ner­ship for the pur­pose of eval­u­at­ing their cred­it­wor­thi­ness in con­nec­tion with an appli­ca­tion for busi­ness credit;
  • I give per­mis­sion to cred­i­tor to request and receive infor­ma­tion required to ver­ify depos­i­tory accounts and credit his­tory. This includes per­mis­sion to run per­sonal credit check reports …;
  • I/We autho­rize Seller from time to time to obtain Busi­ness and Con­sumer Credit Reports on Cus­tomer or any prin­ci­pals listed above or to obtain credit and fund­ing infor­ma­tion from any other per­sons or entities.
  • You may con­tact any bank and credit rat­ing bureaus to obtain credit information

Back when I owned a small man­u­fac­tur­ing com­pany, I would never give ven­dors a per­sonal guar­anty (I would just go to their com­pe­ti­tion if they wouldn't extend credit). But, I would have granted per­mis­sion to run a per­sonal credit report. A cou­ple decades later, I real­ize what an impor­tant tool this can be for a cred­i­tor if an account becomes problematic.