- 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.
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?
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.
Struggling with debt?
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q3 2023 was $17.291 trillion. Auto loan debt was $1.595 trillion and credit card was $1.079 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Utah, 13% have student loan debt. Of those holding student loan debt, 7% are in default. Auto/retail loan delinquency rate is 2%.
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