by Donna Carlson

 

For small business trucking companies who want to grow and professional drivers who want be owner-operators, your credit record can make or break your chances for success.

The loan industry sums it up with a motto: Past performance is a prediction of future performance.

A good credit rating is important if you want to obtain any type of loan and especially if you need to finance a truck. Establishing and maintaining a positive credit history creates freedom in purchasing for your future.

The first step to good credit is to find out what is in your credit files. There are three main credit reporting bureaus or (CRBs). Equifax is also popular with large lenders, but most small lenders use Trans Union, a bureau comprised of thousands of small divisions within its company. Experian (formerly TRW) is another popular CRB. Keep in mind that these companies do not grant credit. Your future lender has an established criterion, which they forward to the CRB to check your credit.

Knowing what is on your record will make you a more informed consumer. Bite the bullet and pay the fee for reports from all three bureaus. Most CRBs charge around $8 for a full report. It will be worth the effort because bureaus don't always share information, and you could get a surprise when you apply for credit or to finance that new truck. If you have been refused a loan, you have a right to a free copy of your report. Contact the CRB or lender for a free copy. Once you receive the report, here are things to check out.

Inquiries

Have you applied for numerous credit cards? Each card that comes as "junk" mail that you fill out can mark your credit record with an inquiry. More than six inquiries a year could cause you to be denied a loan. If you find unauthorized inquires on your record, you have the right to have them removed. There are exceptions to this rule. Anyone who has a judgment against you, such as the IRS, or a creditor may make an inquiry against your record without permission. Double flag this one. Bureaus may legally use information from an inquiry for their files and sell that information to a telemarketer or mailing list. We have included addresses below if you would like to be removed from lists.

Time

Lenders look at the length of time a revolving account has been open, your payment record on that account, and/or the length of time an account has been delinquent. A bank spokes person from the United Missouri Bank said a delinquency doesn't necessarily make you a bad risk for a loan. It depends on the circumstances and how long ago the delinquency occurred.

Delinquent accounts

Accounts are marked 30, 60, 90, or 120 days late. A 30 or 60 day late payment may not hurt your chances of getting a commercial loan, but you should write a letter to the CRB to be attached to your file explaining the circumstances.

Current balances

Lenders look at how many accounts you have open and the balance on each. Part of their evaluation rests on how many accounts you have opened within the last 12 months. Too many new accounts can make you appear to be a bad credit risk.

References

When you apply for a commercial loan, does the lender look at personal references?

Craig Sciara, of OOIDA's truck finance department, says no. "References may be needed for a consumer loan," says Sciara, "but a commercial deal either proceeds or stops with a credit bureau report."

Collections and bankruptcy

Accurate negative information may stay on your record for seven years.

There are some exceptions: Bankruptcy may be reported for ten years. Credit information reported because of an application for $150,000 of credit or life insurance has no time limit. Information about a lawsuit or an unpaid judgment can be reported until the statute of limitations runs out in your state. Federal student loans that are in default have no time limit.

"There is a myth out there that bankruptcy cleans your record so you can go right out and obtain more credit cards or a loan," states OOIDA's Sciara, "It just isn't true."

If you find your record contains inaccurate information, some dedicated effort on your part can clean it up. Begin the fix by writing the credit bureau and the information provider to inform them you have the correct information. Make copies of everything that supports your claim and do not send originals. Send your letter by certified mail, return receipt requested. By law, the CRB must investigate your claim and if it finds the disputed information to be incorrect, it must notify all nationwide CRBs to correct your file.

Secured credit cards are one legitimate way to reestablish credit. Check with your bank for the secured amount you will have to deposit. Some banks will let you deposit as little as $200 for a card with $500 credit. These cards have a high rate of interest, but it may be worth it to regain a good credit rating. One national bank stated that it would look at this method of repayment as a standard for granting a loan. Customer service at Trans Union Corp. said a secured credit card is noted on your record with the initials SC and the payment record is scrutinized by lenders in the same way as they view a regular unsecured card. It is the payment history that counts.

If you decide you need outside help to reestablish your credit, Jack Hobbs of American Credit Counseling Service (they call themselves "accs") gives the following advice. Most legitimate services will not charge you a fee. Legitimate services collect their fees from the companies to whom you owe money. His company will communicate by phone or fax, making it easier for an OTR driver to communicate about credit problems.

"Don't listen to the ads on television, radio, the Internet," Hobbs says, "or those quick fixes that arrive in the mail. Rip up any ‘pre-approved' application that asks for a processing fee. Those companies are in the business to take your money."

Hobbs suggests if you receive unsolicited brochures that claim they can fix your credit, be on your toes. Your e-mail may be full of them, touting they can change your life for only $39.95 plus $5 shipping and handling, satisfaction guaranteed.

"Be aware of fraudulent companies," says Hobbs. "You can fix your own credit."

If you are planning to finance a commercial loan, what can make or break the deal?

Craig Sciara says OOIDA's truck finance program looks at your employment history.

"Stability is important; no changing leases every six months," says Sciara. "A credit application is ‘half collateral, half credit.' A first-time buyer may have good credit, but not much experience as an owner-operator or a lot of time behind the wheel. We look at the whole picture." LL