As you may have noticed, much of 2018's Business Credit Basics training has focused on the importance of adding payment history to your corporate credit report as a means of boosting your scores and ratings.
But today, I'd like to provide a little insight into what a huge difference you can make when you add the right kinds of vendor and supplier payment history to your commercial credit report, and we'll use one of my actual clients as an example.
Ronnie first came to Starpoint in 2016. He owns an East coast construction company that operates locally, but also bids on federal contracts to the tune of a million plus per year — but things weren't always running so smoothly...
When Ronnie first came to Starpoint two years ago, he was desperate. D&B had just downgraded his corporate credit and he was in danger of losing some major contracts. His D&B report had old, out-dated information that was no longer relevant to his company. For payment history, all he had were a couple of derogatory payments. Because it had been so long since he'd updated his company's data, none of his recent positive payments were flowing in like they should, and his D&B report certainly wasn't showing a business that did about $220,000/year in sales.
With old information in Ronnie's file, the address and phone number he submitted on bids and applications didn't match what was showing in the D&B report. Because of that, potential customers and contractors oftentimes couldn't find him in the D&B database, so he would get passed over for certain contracts or would get denied for the credit he needed to complete the bids he did win.
Even when potential suppliers did find him, though, without positive payment history, his 10-year-old construction company looked like it wasn't legitimate or couldn't sustain credit. Some of the most basic accounts were requiring him to provide a personal guaranty, and some declined him completely because they thought his business was fraudulent. He was at his wit's end and needed help fast.
Within a few weeks, we'd updated his data, proved his business was still legitimate, and added his current payment history to the file. His scores were back to healthy status and he was able to move his business forward.
But about six months ago, Ronnie came back to Starpoint for my Maintenance & Monitoring service ($360/yr). His D&B report was still fine, but some of his older payments had begun to drop off the report, and his scores were starting to suffer. (Payments older than 24-28 months expire and fall off the report.) I immediately requested a revised vendor list. But business was good (now $2.5m/year in sales) and getting that vendor list to me wasn't high on Ronnie's list of priorities.
As of three weeks ago, though, his D&B report was down to just four payments left in the file. If just two more dropped off, he would again lose his scores and ratings. This sure wasn't an accurate representation of a company that spends close to a million a year on equipment and supplies.
My pleas for his vendor list grew more urgent (and frequent) until his bookkeeping department finally relented, sending me a list of over 100 companies they had spent money with in the past year. I vetted the list to see which companies might qualify (about 60 of them) and which could get added the fastest. We ordered a month of D&B's Creditbuilder ($144) and I started the submission process the very next day.
In less than two weeks, we've added $180,550 in payment history from eighteen vendors (and we still have 38+ to go!) Not only are his scores and ratings back to awesome, they are higher than they've ever been.
The improvements have been so dramatic that I actually received a call from one of Ronnie's contractors yesterday. She said their company has been receiving what seems like daily alerts from D&B saying his scores are improving. She called Ronnie to find out what he was doing differently (because they're having the same problems with out-dated data and poor payment history) and he gave her my number and told her to call. I'll be starting work on their D&B file on Monday.
Updating your company's data and adding payment history to your report really isthat important... Whether you are a federal contractor making millions, or a small mom-and-pop shop struggling to keep your head above water, or a young start-up just getting your feet wet — your company's creditworthiness is one of the most important representatives you have, and it will not take care of itself.
Give me a call to see if I can help whip things back into shape for your company!