When customers consistently pay late or default on payments, it can seriously impact your company's cash flow and operations.
Reporting these payment behaviors to credit bureaus can help protect your business while also contributing to a more transparent credit ecosystem.
This article walks you through the process.
Can a small business report nonpayment to credit agencies?
Yes, small businesses can report customer payment behavior to credit bureaus, including nonpayment, but it’s not as simple as filling out a form or writing an email.
To report consumer credit payment data, you'll need to become an approved data furnisher with major consumer credit reporting agencies like Experian, Equifax, and TransUnion.
To report to business credit bureaus and impact business credit reports, you'll need to become a data furnisher for major business credit bureaus.
The requirements for becoming a data furnisher typically include having a legitimate business need to report credit data, maintaining secure systems for handling sensitive information, and demonstrating the ability to report accurate data consistently each month.
Benefits of credit reporting for businesses
Although it requires an ongoing commitment to full-file reporting—sending all your payment data to credit bureaus every month—reporting to credit bureaus can offer several advantages for your business.
Enhanced collection leverage
Having the ability to report to credit bureaus provides additional motivation for customers to resolve outstanding payments. This extra leverage can be particularly effective when dealing with otherwise unresponsive accounts.
Stronger credit ecosystem
By reporting payment data, your business contributes to a more comprehensive credit reporting system. This helps create a more transparent business environment that benefits all participants in the marketplace.
Increased business credibility
Becoming an approved data furnisher enhances your company's professional standing. This status signals to customers and other businesses that you operate at a higher level of financial sophistication.
Benefits of credit reporting for customers
Credit reporting isn't just beneficial for businesses—it can also provide significant advantages for customers, especially those who manage their accounts responsibly.
Credit history development
Regularly reporting payment activity gives customers the opportunity to build a stronger credit profile through their normal business transactions. This can be especially valuable for customers who are working to establish their credit history.
Recognition of reliability
Consistent reporting ensures that customers who maintain good payment practices receive recognition for their reliability. This positive payment history becomes part of their credit record.
Improved future credit terms
A documented history of timely payments can help your customers secure better terms on future financing over the long run. Whether they’re looking to buy a home or find themselves facing unexpected hardships, a strong credit profile can make a tremendous difference to their finances.
Comprehensive credit profile
Regular reporting provides a more complete picture of a customer's creditworthiness. This comprehensive profile can be beneficial when they’re applying for loans or establishing new credit relationships.
How to report to credit bureaus as a business
Becoming a consumer or commercial credit bureau data furnisher involves several key steps and ongoing commitments.
Here's what you need to know.
Step 1: Meet the basic requirements
Before you apply to become a data furnisher, make sure your business meets these basic criteria:
- Has been operating for at least two years
- Maintains accurate payment records
- Has secure systems for handling sensitive data
- Can commit to monthly reporting
- Has a legitimate business need to report credit information
Step 2: Choose your credit bureaus
Decide which of the major consumer credit bureaus you want to report to—Experian, Equifax, and/or TransUnion. Consider starting with one bureau and expanding to others as you become more comfortable with the reporting process.
Step 3: Apply to become a data furnisher
When you apply to become a data furnisher, you'll need to submit comprehensive documentation to your chosen credit bureaus. This typically includes detailed business registration documents, tax identification numbers, and proof of your ongoing business operations.
The application process also requires demonstrating your capability to handle sensitive data securely. You'll need to provide information about your data security measures and reporting capabilities, including any relevant software systems and internal controls you have in place.
Step 4: Set up your reporting system
Setting up the monthly reporting system requires careful attention to both technical and procedural details. You'll need to set up the required software systems for reporting and establish secure protocols for transmitting data to the credit bureaus.
You’ll also need to train your staff in proper data handling procedures, security protocols, and the importance of maintaining data accuracy. Create a clear schedule for your monthly reporting and establish verification procedures to make sure the data you’re reporting is accurate.
Step 5: Begin reporting
Once those systems are in place, you'll begin the actual reporting process. This involves submitting consistent monthly reports that include both positive and negative payment information, as well as maintaining detailed records of all reported information for future reference—and potential dispute resolution.
Throughout the reporting process, you’ll need to adhere to Fair Credit Reporting Act (FCRA) guidelines. This includes ensuring the accuracy of all your reported information and maintaining proper documentation of your reporting activities.
Step 6: Monitor and maintain compliance
Reporting data to credit agencies isn’t something you can just do intermittently.
Ongoing compliance requires robust monitoring procedures, including systems that can track and verify all your reported information. You'll also need to conduct periodic audits to ensure your reporting meets all current requirements.
Be prepared to respond quickly to any customer disputes that arise—after all, by reporting to credit agencies you’re affecting your customer’s credit report. Reporting inaccurate data can be devastating to their finances.
Put clear procedures in place for investigating disputes and updating payment information as needed. Additionally, you'll need to stay current with any changes in reporting requirements and maintain strict security protocols for handling sensitive data.
Finally, proper maintenance of your reporting system involves updating your security measures regularly and reviewing your internal processes to make sure they remain compliant with current standards.
Build credit history with the BILL Divvy Card
While you're working to establish credit reporting capabilities, consider how your own business credit can help you grow. The BILL Divvy Card¹ reports to credit bureaus through the Small Business Financial Exchange, helping you build your business credit profile while managing your expenses.
With credit lines from $1,000-$5M², you'll also get:
- Real-time visibility into spending
- Ability to set custom spending limits
- Virtual cards for secure online purchases
- Built-in expense management tools
The BILL Divvy card in action
See why Diversified Dividends LLC says that BILL Spend & Expense’s seamless solution has helped them become stewards of their funds, gain access to much-needed business credit, and become successful small business owners.
¹The BILL Divvy Card is issued by Cross River Bank, Member FDIC, and is not a deposit product.
²Credit lines and the advertised range are not guaranteed and will be determined upon application approval.
