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Business Debt & Credit Report

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

I had a business that failed around 2001. It was a construction co. I had a bond on a project and the surety co ended up with attorneys fees. I personally guaranteed the bond. The surety turned the attorneys fees over for collection. The collection company has decided to enter a tradeline on my personal credit report. They are also reaging the account and reporting the history inaccurately. From what I read these are FCRA violations. The CA disagrees stating FTC statement "Commercial credit or insurance. A report on a consumer for credit or insurance in connection with a business operated by the consumer is not a consumer report", and the act does not apply to it". Is it even legal for them to list this item on my personal report?

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Bill's Answer
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Highlights

  • Understand when a business debt can appear on a personal credit report.
  • Make sure to dispute any inaccurate information on your credit report.
  • Consult with an attorney, to see if the debt collector is violating the law.

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

Business Debt and Personal Debt

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.

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Contact the Credit Bureaus Directly

You may also wish to dispute this debt with the major consumer collection bureaus — Experian, Equifax, and TransUnion. See the Bills.com 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

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15 Comments

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  • NY
    Jul, 2011
    Nicole
    Canoga Park, CA
    I always use my business it's just so much more convenient. If it provides extra protection too - that's great!
    0 Votes

  • BA
    Sep, 2010
    Bill
    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.
    0 Votes

    • MG
      Dec, 2010
      Mark
      Louisville, KY
      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?
      0 Votes

    • BA
      Dec, 2010
      Bill
      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.
      0 Votes

  • 35x35
    Sep, 2010
    Kelly
    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.
    0 Votes

  • BA
    Aug, 2010
    Bill
    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.
    0 Votes

  • 35x35
    Aug, 2010
    Aaron
    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...
    0 Votes

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