As you can probably guess, the effects of a negative credit history are extremely far-reaching. When an organization, especially a company, has a negative credit history, it can keep that company from borrowing money for a new project, from mobilizin
As you can probably guess, the effects of a negative credit history are extremely far-reaching. When an organization, especially a company, has a negative credit history, it can keep that company from borrowing money for a new project, mobilizing long-term and medium-term capital sources for development investment, or getting a fair goods insurance rate through international insurers. With a negative credit history, the company might confront a lot of problems, such as having to pay security deposits on utilities, declining trustworthy among partners, and increasing time on banking activities. Indeed, the impacts can be reduced, but it is notoriously difficult to erase all the consequences that come from this stain.
What is a Negative Credit History?
Having a negative credit history means a company has several pieces of negative information on its credit report – a document that contains details of the company payment and account history with creditors and lenders.
Several things can impact a company credit, but a negative credit history is often caused by severely delinquent accounts like late payments, debt collections, charge-offs, repossession, foreclosure, judgments, tax liens, or bankruptcy on that company credit report. These all come from missing payments on its accounts. One or two late payments alone won’t cause a negative credit history, but several late payments will, especially if the company is late on several different accounts within a short period of time.
Having high balances on credit cards and loans, compared to a company credit limit or original loan amount, can also lead to a negative credit history.
How to tell if a company has a Negative Credit History
Checking a company comprehensive report is the best way to gauge its credit history. As can be seen, the credit history is an important part that shows all the information of the company payment activities in the past. The more information this part reveals, the more negative the company credit history is.
People can check this type of information in many ways. In fact, some newspapers usually mention top biggest negative credit activities. For a small company, this type of information can be checked in the State Bank or in the bank that the company cooperate with. In Vietnam, VIETNAMCREDIT is a company that provides credit history in its product: company report. Company report prepared by VIETNAMCREDIT contains most updated information about a certain company. The report is made based on information collected from reliable sources and direct investigation. A team of financially analytic experienced experts will closely look at the figures and deliver objective opinions on the company, including its import-export activities, potential risks, financial health, payment history, litigation, and our rating scores. The report aims at giving our customers insights into their business partners, navigating and mitigating possible risks as well as assisting the customers in making well-informed decisions.
Improving a Negative Credit History
Accurate negative details can stay on the company credit report for up to seven years (or 10 years for bankruptcy). If the information blemishing the company credit history is inaccurate, that company can dispute that information with the credit bureau to have it removed.
The company, then, might be able to remove negative things from its credit history with a pay-for-delete or goodwill letter. The former is a request to remove negative information in exchange for payment and the latter is a request to remove negative items as a matter of goodwill. Others businesses do not have to remove accurate negative information from its credit report as long as those items are within the credit reporting time limit. Even paying a delinquent account doesn’t change the fact that it was once delinquent.
The adage “Time heals all wounds,” is true even with a wounded credit history. As the negative information gets older, it will be harder to impact the company credit rating. The company may begin to qualify for new investment budget and loans, but it may not get the best terms on those. It may have to accept low limits and high-interest rates until its negative credit history gets better. For this company, it should use these accounts to demonstrate that it can handle credit and to add positive information to its credit history. That movement will help the company improve its credit and qualify for much better accounts in the future.