FICO scores are extremely easy to use. You get a score ranging from the three hundreds through the eight hundreds and can simply choose any number along the scale as a pass/fail point. Many small companies do just that, but it isn’t always in their best interest.
FICO scores are fairly accurate for the intended use. That would be Credit Card Companies, big lenders and Mortgage Companies. If you aren’t among the chosen, you may need to make a few adjustments to what you are reading. If you grant credit solely on the FICO score, you may be making decisions that will cost you money.
You are probably not surprised that the FICO score wasn’t designed just for you. To get the most out of the FICO score, you need to do a bit more checking of the Credit Report. You can interpret the results to obtain a better match.
The FICO only measures stability with credit accounts. If you want another stability measure you can check out the residence history. This is particularly valuable if your are a Landlord. If a person moves frequently you might want to know why. Even with a good FICO score, it may be hard to find them if they walk out without paying your bill. Keep in mind that not every business reports unpaid bills to Credit Bureaus.
Some money trends do not impact heavily on FICO scores but could be very meaningful to you. You need to check out the percent of available credit. If you get the summary section (highly recommended) it will show you total available credit and total credit. Some people use Credit Cards as loan sources. They may pay the minimum each month, but they spend more and the available credit keeps shrinking.
Eventually, they run out of credit and everything comes tumbling down. You want to stay away from that, so be very careful if a person has 30,000 in total credit and has used up 25,000 of it. While the risk is acceptable to Credit Card companies, it is probably higher for you and should not be ignored.
Finally, while it is very likely that every Credit Card, bank loan or Department Store purchase is reflected with the FICO score, many small businesses don’t report to Credit Bureaus. It does not follow as automatic that a person who pays their bank will also pay you. If you are a Landlord or the recipient of a Personal Guarantee, check Employment. Don’t accept a letter or pay stub. They can easily be created on a computer to defraud you. Call the HR department.
It doesn’t take a lot of extra effort to provide yourself with customized results. Start with the FICO score and check a few extra lines.
Two good things will happen: your jaw won’t drop, but your bad debt will.
Understanding debt collection and background screening best practices can save your business big money. Building up front applicant screening into your business processes costs you very little, but saves you so much in the end. If you haven’t already, partner with a full service debt collection and applicant screening company to guide your business to a place of security and prosperity. Contact us to sign up for a free account and get started protecting your business today.
ABOUT EXECUTIVE CREDIT MANAGEMENT, INC.
Executive Credit Management is a full-service Debt Collection and Applicant Screening agency with over 20 years experience located in Central New Jersey. We provide excellent service in the following areas: Employment Screening, Business Screening, and Tenant Screening. Executive Credit Management belongs to a number of Skip Tracing databases and offers services to help locate and confirm the current address of missing debtors. Other services provided are: litigation evaluation on all lawsuit decisions, improvement of the quality of the applicant data, Lawsuit Monitoring, Handling of Debtor Disputes. Executive Credit Management features the best Call Monitoring System in the Debt Collection industry.