Red-flagged Creditbuilding Strategies
Updated: Feb 4, 2022
There is nothing more frustrating than listening to the heart-wrenching tale of a small business owner whose bogus strategy or "shortcut" to building business credit has collapsed around them, leaving their D&B credit file downgraded (or worse) and their company's reputation in tatters. If they're really lucky, they haven't had to call a lawyer... yet.
I get calls, literally, every single day from some poor soul who stumbled across the latest "get rich quick" scheme for building business credit or got suckered into a program touting outrageous pie-in-the-sky results. They have spent hundreds (if not thousands) to get from point A to point B, only to find themselves back at square one when D&B throws the hammer down and they're left empty-handed, or worse... in deep debt and facing criminal prosecution.
Speaking as someone who once worked for Dun & Bradstreet, let me start by saying that D&B's primary focus is NOT on making your business more credible or creditworthy, but rather to protect the financial interests of THEIR customers — the banks, credit card companies, major retailers, insurance carriers, and high-value suppliers who spend millions of dollars each year pulling credit reports on your business.
For this reason, D&B is diligent is tracking every element of data that goes into your credit file, from something as simple as your business name, to the credibility of your suppliers, to the frequency and riskiness of who is pulling your D&B report. They watch for signs of fraud, tactics used and promoted by those who prey off the desperation of small business owners every day. These "shortcut" techniques create visible patterns of misbehavior that are easily identifiable, especially when compared across a platform of companies that turned out to be fakes.
Even if your company is legitimate and can prove its value and strength, engaging in risky (and unnecessary) strategies can sometimes get your company lumped in with the fraudsters, unknowingly putting their commercial credit reputation in a higher risk situation simply because your actions are mimicking the risky actions of others.
For any of you who have thought about using some of the below techniques or "shortcuts" — let's just call this your Stay-Out-Of-Jail-Free card.
Red-flagged Creditbuilding Strategies
SHELF CORPORATIONS have been a big seller for the past couple of years, and are a real money-maker for the companies who sell them. Touted as being a means to get an "aged corporation" to qualify for better financing, the sellers bear no responsibility for any actions you take once you own that entity, even though they clearly promoted its usage specifically for that purpose. What they won't tell you is that your new shelf's corporate details have been flowing into D&B's archives for all of those years, so when you try to create a "new" DUNS profile, change the name or address, correct the names of the principals, or make any other necessary adjustments to the file, the company (and you) will be red-flagged as attempting to misrepresent ownership details. The company that sold you that corp couldn't care less. They've already made their money.
VIRTUAL ADDRESSES clearly can serve a viable purpose and have for a number of years. Most "flexible workspaces" offer options for full-scale (your name on the door) offices, shared office spaces, mail-drop capabilities, and they DO provide valuable services, such as community conference rooms, fax and phone services, and mail receiving and forwarding. But D&B specifically wants the physical location of your business, so only companies who contract full-scale offices in these facilities can legitimately claim they are "operating" from that address. Companies who lease shared-spaces or pay for mail-drop services are not considered to be physically located in that building. If you attempt to convince D&B your company's physical address is located there, you'll earn a dreaded red-flag and may be required to provide a lease contract and receipt for the thousands you have been paying in rent.
COOKIE-CUTTER VENDORS and tradelines are a topic I've covered in-depth several times over the years (read the full-length post here) but I feel this needs further repeating. If you Google-search "Net 30 accounts that report to D&B", you will come across any number of companies or bloggers that will give you the names of several companies who are known to provide Net 30 term accounts to small business owners and those suppliers will report future payment history on those accounts to Dun and Bradstreet. What they don't tell you (maybe because they just don't know or care) is that using only THOSE vendors and suppliers, you may have just earned yourself another red-flag. And if they have never reported on you in the past and suddenly all of them did at the same time, you'll get another red-flag for purposely making a bunch of purchases in a race to get to the "Paydex" finish line!
PURCHASING TRADELINES for your business is not just expensive and unnecessary, it can turn out to cost you a lot more than you bargained for. Companies who promote the sales of trade references are counting on the buyer to be one (or both) of two things: desperate and/or gullible. Creating accounts for your business is a normal part of day-to-day operations. It happens organically, like when you buy something from a company — you create an account, make your purchase, and then pay for it using your business bank or credit card. If your supplier is not an auto-reporter to D&B, you may be able to add them manually to the credit file using D&B's monthly Creditbuilder service. Companies who sell tradelines are going to charge you hundreds of dollars for something that takes less than an hour of their time, and you need to spend money with each supplier to get payment history into your file. Adding your OWN suppliers is easier, cheaper, boosts your scores, and eliminates the potential that you might get red-flagged.
SUDDEN, HIGH, OR TARGETED INQUIRIES on the D&B report can mean several things, but there are TWO that stand out on D&B's radar: either your business is suddenly in the market for a specific type of product or service, or it's facing financial distress. Inquiries are a normal part of business operations. In most cases, they act to help validate your business because they tell D&B that other companies are viewing your report and are interested in doing business with you or extending your company credit. Some inquiries may cause a slight positive boost to your scores and ratings, such as trade-based inquiries that come from vendors and suppliers who provide products and services within your specific industry, i.e. a baker buys flour. However, excessive inquiries from specific financial, lending, or banking industries may throw up red-flags since they often signify a company is experiencing financial distress.
MISREPRESENTING ACTIVE OPERATIONS is a tricky topic, but I feel it needs to be addressed. If you started a business ten years ago but it never got off the ground, and then last week you decided to make a second go of it, you cannot claim your business is really ten years old. BUT... if you have been operating minimally, a few jobs here and there but nothing of any substance, you CAN legitimately tag your business as legitimately being functional in the preceding decade. The biggest tell in that process comes in whether or not you declared your business income on a tax return. Oftentimes, when a company is trying to take advantage of the age of their "dormant" business, D&B will ask to see the tax returns to verify the business was engaged in active operations. While privately held businesses are not required to provide financial statements, failing to be able to prove active operations exist will not only earn you another red-flag, but could place your company into a high-risk status.
EXAGGERATING BUSINESS DATA can bring added scrutiny to an otherwise insignificant credit profile. It's absolutely acceptable for your business to operate from a home office location, whether from your garage, guest bedroom, or kitchen table. But attempting to represent your home office as a larger operation than it is, with twenty employees, or a fleet of sixteen trucks, or a million dollars in sales, will raise eyebrows, and those embellishments may warrant a full investigation. If D&B feels justified, they can pull deeper background data, such as local licenses, sales receipts, bank records, and tax documentation. To avoid the multitude of red flags you can garner from exaggerating your corporate details, provide only the information you can fully validate at a moment's notice.
POKING THE BEAR can get your business more attention than you were hoping for, and all of it will be negative. Back when I worked at D&B, we used the term "poking the bear" to identify pushy, obnoxious, over-bearing business owners trying to force changes or scoring results. They would often use negative techniques that only served to bring negative attention, such as calling in day after day, generating multiple support tickets, attempting to bully, threaten, or intimidate their way to an end goal. While that may work in other environments, at D&B, such behavior was the equivalent of a belligerent child in the grocery check-out. Eventually, patience dissolves. With the click of a "submit" button, an irrational and exhausting business owner has made his final poke. Suspicious or obnoxious activity wins an enormous red-flag and a trip for two to the Severe Risk investigation team.
While even the most financially secure and viable businesses may get hit with a red-flag from time to time, those flags DO add up, and too many can indicate trouble. No one wants to intentionally invite scrutiny and risk by waving these flags from your rooftop. Building and boosting business credit should never place your company, vendors, suppliers, or creditors at risk. Anyone who promotes these types of behaviors are focused more on their bottom line then they are on your company's success.
Please feel free to reach out to me directly if you need advice or assistance regarding legitimate ways to improve your D&B scores and ratings.