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Question:
DEC 12, 2011

Information about business debt on personal credit report

A collection agency is reporting an old business debt that I had on my personal credit profile. Is this legal?

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Bill's Answer: Bills.com Resident Expert

Thank you for your question about business debt that now appears on your personal credit report.

Business Debt and Personal Debt

Generally speaking, it is my belief the business accounts such as the one you mention in your question should not be reported on your personal credit reports. While you did personally guarantee the bond, this was essentially a business transaction, and you acted only as a guarantor in case the business defaulted. The bond was not taken out in your name, nor did the bond issuer consider your personal credit history when underwriting the bond. Therefore, the account should not be considered as part of your personal credit history. While there are varying interpretations of how business debts should be treated in regard to personal credit reports, in my past experience, most business accounts do not appear on personal credit reports, unless the account was actually a personal account, such as those opened by sole proprietors. However, if the bonding company obtained a judgment against you personally, it would be appropriate for the judgment to appear on your credit report as a public record.

Dispute Inaccurate Information on Your Credit Report

In regard to the Fair Credit Reporting Act, the collection agency is correct that the FTC has stated in its policy briefs that the FCRA does not apply to accounts opened primarily for business purposes. However, the FCRA's non-application to the account in question does not mean that the account should appear on your personal credit report, nor that the collection agency has free reign to report whatever information it wants to report to the credit bureaus. You mention that the collection agency has been inaccurately reporting the delinquency date of the account; regardless of the fact that the FCRA does not apply to business accounts, the collection agency cannot arbitrarily change the dates on the account. You may have a cause of action against the collection agency for intentionally reporting inaccurate information about you to the credit bureaus, especially if its actions have harmed you in some way.

Consult with an Attorney

I encourage you to consult with an experienced consumer rights attorney regarding this debt to determine the best course of action available to you to solve this problem. An attorney should be able to help you fully understand your rights under both Federal and State law, and what you can do to protect yourself. Your attorney may encourage you to file a lawsuit against the collection agency and the creditor. Or, he may enter into negotiations with the collection agency. For example, the collection agency may be willing to remove the account from your credit report if you begin making regular payments on the debt.

Contact the Credit Bureuas Directly

You may also wish to dispute this debt with the major consumer collection bureaus — Experian, Equifax, and TransUnion. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.

I also invite you to visit the Bills.com Credit Help page, where you can learn more about credit, credit reports, and credit scoring.

I wish you the best of luck in resolving this account.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (15)


Nicole Y.
Canoga Park, CA  |  July 05, 2011
I always use my business it's just so much more convenient. If it provides extra protection too - that's great!
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Bills.com
September 12, 2010
I am not aware of a law that allows the companies to report your business debt to your personal credit report. Still, the best course of action I can advise you is to speak with an experienced consumer rights attorney. You may also want to speak to the Consumer Protection Agency in your state of residence. If you end up being responsible for debt that you will struggle to pay, please read about the various debt resolution options available.
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Mark G.
Louisville, KY  |  December 21, 2010
I was an owner in an S-corp business (2 partners). The business shut down, and we had a business credit card that was tied to our business account. After payments stopped on the card, the company informed me that I was personally liable for the debt, and has filed it on my personal credit report as charged off. I asked for a copy of any signed personal guarantee, but they could not get one. I was told that I was liable because their "system" had me listed as the person liable. Can I get this debt removed from my credit reports? Will I be required to pay this business debt?
Bills.com
December 22, 2010
If you told the credit card issuer your "system" listed you as not liable, would the card issuer believe you? What you described is a perfect instance of the necessity to validate a debt. Just because a voice on the telephone says you owe a debt does not mean you do. Make the credit card issuer prove you personally, and not the corporation, owe the debt. Remember, you may have signed the credit card application. If you signed it on behalf of the corporation in your role as a corporate officer, then it is likely you have no personal liability. On the other hand, if the credit card contract states you have personal liability, then the situation is less clear. If the balance is large, it will be worth paying your attorney to review the credit card contract and debt validation documents the credit card issuer or collection agent sends you.
Kelly .
September 11, 2010
I had 2 companies that went out of business. I have 4 business accounts where "no personal guaranty" is marked on the credit application. The credit application was accepted and credit extended. Now that the bills are not paid the 4 credit card companies (Capital One, Discover, Citibank and Infiniti) have reported these items to my personal credit. I have disputed this with the 3 credit bureaus and each company came back stating it was reported as accurate. How can they do this? I have been in credit and finance for 25 years and am not aware of any statute that would allow these companies to do this.
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Bills.com
August 04, 2010
Is the account with the utility in your name or the LLCs? Go back into your records and see if you personally were a guarantor for that account. If you were, which I think is likely given the facts you presented, then you have liability for this debt. If you were not, then I would be very curious to learn how the utility made the connection (pun intended) between the LLC and you as a consumer.
Aaron .
August 03, 2010
I started an LLC in 2007, closed Nov 2009. We filed bankruptcy personally as the business didn't have a lot of debt. But last month I found a collection from the electric company for $411.00 on my personal credit. That account was in the business name and I was almost sure that it was PIF when we disconnected service. So now it is past my bankruptcy period and I have a new collection. I disputed with Equifax but they just said it was reporting correctly. Not sure if this is allowed and if I need to do anything to get rid of it... I never even got a collection notice in the mail. Let alone a call...
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Bills.com
March 26, 2009
sorry the answer was not adequate for your purposes, but we do try hard to respond to a VERY high volume of questions and concerns for free... so sometimes you get what you pay for :)
Ndakalako L.
March 26, 2009
the answers you gave are not as adequate as i though it can be. in the other hand you never explain things in the understandable way, for example having the question on the top and then follows the answer to that. anyway i really appreciated highly your contribution to valuable question in accounting world. thank you very much on that.
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Bills.com
March 23, 2009
Thanks for visiting Bills.com! Without knowing more about the terms under which these credit accounts were established, I cannot tell you if you are personally liable for these debts. For example, it is possible that you actually applied for these accounts in your personal name even though they were "business" accounts. If you are personally liable for the debts, you will probably need to resolve the debt either through a settlement, payment plan, or by filing for bankruptcy protection. You took the right step in hiring an attorney to review these accounts for you and advise you of your options, but if you feel that your attorney is not providing you with the information you need, you should not hesitate to call him and ask him the same questions you have asked me. If he cannot give you satisfactory answers, or if you do not feel comfortable with his representation, you may want to seek a second opinion from a different attorney. I wish you the best of luck!
Joe R.
March 20, 2009
Bill, I started up a "C" corporation in 2004 and did business as a franchisee until December 2008. I have three credit cards, one was sent to me even though I did not apply for a card or solicit for it. The other two I have no hard copy but may have applied for a business card under the corporation name. Unfortunately, the small print that one reads after you have received the card makes one liable to card payments even though no personal guarantee was signed. What rights do I have to fend off these debts (Discover has already reported two late payments to one of the credit bureaus)? I have offered 30 cents on the dollar but yet to get an acceptance. Discover countered with 60cents on the dollar. I am out of business, no steady income and don't want to file for bankruptcy. Will be grateful for any advice or suggestions. I have retained an attorney, whom I have paid about $900 so far and got nothing in return. Do you think I have the wrong attorney? I am wondering out loud!!! Thanks
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Bills.com
December 16, 2008
In most States a single owner business would be construed as a sole proprietorship, which it basically is. In a sole proprietorship kind of a business the business owner is personally responsible for any debts in the name of the business. The best place for you to start is to get credit reports from all three bureaus to see if this account is already showing up there. If the account does show up, check to see what the last payment date is. The statute of limitations (SOL) starts ticking from the date of the last payment. since NM's SOL is 4 years, you should be safe. Don't get frightened by the creditors threats, as that is all they are. Ask them for a debt validation letter, that should buy you some time while you do your research. All the best!
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