Experian and Moody’s Small Business Index—Business Fuel Podcast #88
Learn why it’s important to monitor your credit and what experian uses to create their credit report
Listen to our interview with Experian’s Joel Pruis
Check out today’s podcast with Experian’s Joel Pruis to hear about the Small Business Index created by Experian and Moody’s Analytics and learn why it’s important to monitor your credit and what Experian uses to create their credit report.
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Patrick Wiscombe: Serving just over 375,000 listeners, this is The Business Fuel Podcast. Coming up on today’s show, we will be speaking with Joel Pruis. He’s a Senior Business Consultant with Experian. But first let me bring in the co-host and producer of the podcast, Ty Kiisel. You were talking about one of your Forbes article before we started. It was about Maria Contreras Sweet.
Ty Kiisel: I love what she’s doing at the SBA. I love the focus she’s given to making the small business loan process faster and easier. It feels like it’s more than just lip service. She’s implemented things that are going to be really good for small business owners. The strides she has made in the first 100 days of her administration have been significant and I’m looking forward to the rest of her run. So yes, that’s what I wrote about in my Forbes article this week.
Patrick Wiscombe: You can check out all of Ty’s articles on Forbes.com. Just do a search on his name, Ty Kiisel, in the upper right corner of the site. Let’s go to Indiana now and say hello to Joel Pruis. Joel, thank you for coming on.
Joel Pruis: Glad to be here.
Ty Kiisel: I’m really excited to talk to you today. I’ve been going over your latest analytics report on small business. I think you call it your small business index. Some of our audience may not know what that is, so can you give us a little background on what it is and why you’ve partnered with Moody Analytics to do it?
Joel Pruis: The report, or index, describes the health of the small business segment. So we use our Experian credit data and partnered with Moody’s macro-economic data to provide a perspective of how well small businesses are paying today. We can also forecast how well small businesses will be able to pay their obligations in the future. The index has been measured since 2010. We’ve been seeing a nice progression of improving conditions and performance of small businesses across the country.
Ty: This is something we will be talking with you about once a quarter. What’s the highlight of the most recent report?
Joel: It shows small businesses rebounded nicely from the first quarter of 2014. They improved payments, reduced delinquency, and were able to obtain credit in the second quarter.
Ty: How is a business credit report created from Experian’s perspective?
Joel: At the onset of a business credit report, two factors come into play. With the formation of a company, an LLC or a corporation, a public record is created. Something that puts them on the map that they will be doing business. Combine that with any creditors they might use. That is a broad term including not only banks, but also utilities, cell phone bills, trade accounts like Home Depot, etc. Anytime you establish an account with them and they report to Experian, we then establish a file under that business name and continue to add to it as more recordings come in to us. Similar to the consumer side, but putting it under the business name instead of the individual.
Ty: The report that just came out said that business are getting better at meeting their obligations. Does that mean credit scores are going up too?
Joel: Yes. We actually saw a significant increase in what we classify as a generic risk score for Experian. It indicates improving payment performance. And as a result, we are predicting improving future payment performance based upon that risk score we have.
Ty: What’s the best way to build a good credit score?
Joel: First and foremost they have to understand the creditors they are doing business with are reporting to a credit agency such as Experian. Second, they should be taking a look at their own business credit report. Make sure the information is accurate. And identify the particular issues that are showing up. If you do something as simple as go to businesscreditreports.com, they would be able to pull up their particular business credit report. They could identify issues that are potentially keeping their score from being better. When you are in small business, cash flow is tight. At the same time, if you start to delay payments to your trade suppliers, like Home Depot, that will have a negative impact on your business. Thus the ability to maintain those accounts, or get new accounts, becomes hindered. If you’re paying in a timely manner, that will help improve your business score.
Ty: We talk a lot about how in a young small business, it’s important to monitor and maintain both a personal and business credit score. Experian is one of the few that monitors both consumer and business scores. Can you tell us how to access our business scores with Experian?
Joel: Many people are familiar with consumer scores. If you have 700 or better, that’s a very strong score. Access to the business reports is a similar type approach. For Experian, we go to smartbusinessreports.com. You’d be able to then search for your business. You’d be able to see who’s reporting your credit to us and how well are you paying. Our scores are based on a scale of 0-100. This scaling is really based on a percentile. For example if you have a score of 72, it means you are paying your bills better than 72% of the businesses out there. Behind the scenes, it tells creditors what the likelihood is that you will remain current for the next 12 months.
Ty: I’m an Experian customer and I get an update so that I look at my score at least once a month. From a perspective of experience, why is it important for a small business owner to be monitoring his or her credit score on a regular basis?
Joel: It helps you make sure accounts are being reported. It helps creditors to know that you are in existence, you are a viable business, you have other activity, and shows how well you are paying those other creditors. The type of monthly service you described is available only on the consumer side. So it’s extremely important on the business side to check every month to see what type of reporting is being done. It’s important to provide an accurate profile of your business.
Ty: I think Experian wants to have the most accurate information they can. Is that safe to say?
Ty: So if there is an error, how does the business owner correct it? How do they communicate with Experian and the vendor that has made the mistake?
Joel: On a business report, there will not be an identifiable creditor. So first step would be contact Experian through our customer service resolution. Indicate that you’re challenging that particular trade line as being delinquent. We can then work with that owner to resolve the issue. We’re here to help and work out any issues. We want to accurately reflect the payment performance. That’s in our best interest, the small business owners interest, as well as the creditors interest.
Ty: Once a mistake has been identified, how long does it take to make a correction?
Joel: Once we have been notified of a dispute, we do have some response deadlines and timelines. I don’t know the specific number of days, but ballpark would be 30-60 days at the very latest.
Patrick: Let me jump in here a second. If someone does have issues or disputes with their credit, do you recommend getting a credit repair company? Or do you recommend dealing directly with the bureaus?
Joel: We recommend you contact the bureau directly. We have a vested interest in making sure our data is as correct as possible.
Ty: If I’m an Experian customer and I have a dispute that gets settled, is it safe to assume the other bureaus will see that somehow? Do I need to do the same thing with all of them?
Joel: You have to do the same thing with all of them. There are different reporting lines.
Ty: I think this is a great service you are providing. It gives us the ability to monitor our credit and gives us insight into what a lender will be looking at. It’s one of the most important metrics a lender is going to use. Is there anything else you’d like to add as we wrap up?
Joel: One of the things we’re seeing right now is the improving conditions. We will be doing a webinar on that in a few weeks. It’s favorable conditions for small businesses to do well. Be sure your credit profile is accurate. Make your payments on time. Make sure there is nothing you are doing unintentionally that will impact your future success as you grow your business and obtain more credit.
Ty: Is registration for the webinar open right now?
Joel: Yes. Go to Experian.com/b2b.
Ty: I’m excited to see the trends improving for small business. I look forward to the webinar. I will definitely be attending. Thank you very much.
Joel: Thank you. I appreciate the time and look forward to the next time.
Patrick: We’ll go ahead and wrap up this week’s edition of The Business Fuel Podcast. As a reminder, you can pick up the podcast each and every Tuesday morning on Lendio.com/blog. Or if you prefer, subscribe on iTunes. Just go to the podcast store and search for Lendio. And Happy Anniversary. Today is the 3rd anniversary of our first podcast.
Ty: That’s fantastic!
Patrick: Ty, you also have a column in the Deseret News that we never plug. Tell us about that.
Ty: I contribute regularly to the Deseret News, a local publication here in Salt Lake City. I talk about small business issues, like financing. It’s rewarding to talk about something most small business owners really don’t understand until it’s too late. It’s worth checking out.
Patrick: So for Joel Pruis, Senior Business Consultant with Experian, Ty Kiisel, my name is Patrick Wiscombe. Thank you for listening. We’ll talk to you again next Tuesday.
Bringing you interviews with top business professionals and business financing tips to help fuel your American dream. This has been the Business Fuel podcast, with your hosts, Ty Kiisel and Patrick Wiscombe, heard exclusively on Lendio.com