How to Obtain Credit Reports for a Small Business

Many business owners have begun running credit checks on employees, vendors and customers, for the purposes of protecting their interests. A business owner, for example, can obtain credit reports for customers to whom they plan to extend credit. This allows them to make an educated decision about the risk they are undertaking.

It is also true, however, that credit reports are tightly regulated. You can't obtain credit reports on anyone you wish for no reason at all; your purpose must be covered under the Fair Credit Reporting Act. If you are able to substantiate your reasons for seeking a credit report, you will be able to view it.

Credit Check Companies

The easiest way to obtain credit reports for a small business is to subscribe to a credit check service. These companies process requests from employers, business owners, landlords and other parties who investigate creditworthiness. They generally charge a fee, such as $30, for each credit report they issue.

You can also go directly to the source. Major credit reporting agencies, such as TransUnion and Experian, offer small business owners the opportunity to obtain credit reports through various programs. These also require a fee, either per check or per month) for access to that data.

Obtain Permission

In order to obtain credit reports for a small business, you must have permission from the person on whom you are running the check. According to AllBusiness.com, permission must be granted in writing on a form separate from other documents related to purchases, hires, and tenancy.

This does not mean that your customer or employee must sign the document. They have the right to refuse to allow you to obtain credit reports, but you also have the right to refuse to do business with them. It is best if you let potential employees and customers know about your credit check requirements up front.

Know the Requirements

In some cases, small business owners are not allowed or able to obtain full credit reports. For example, employers can run credit checks on prospective employees, but they are usually limited to modified credit reports that omit certain types of information, such as account numbers. This regulation was instituted for privacy reasons.

In most cases, however, a modified credit report is sufficient to determine whether you want to conduct business with an individual. It will still provide a wealth of information, including payment history and any delinquencies.

Notify Subjects

The subject of a credit check has the right to be notified if you decide not to hire them or accept their business based on the report. For example, if you are a landlord running credit checks on prospective tenants and one of your applicants does not seem like a good risk based on his credit report, you must notify him in writing of what you discovered and why it has negated his ability to rent your property.

Make sure you send this notice by mail with all details included. This will protect you from legal action in the event your customer, tenant, or employee objects to your decision. Keep in mind that the subject of your credit check also has the right to see a copy of the credit report you obtained.