Businesses, no matter whether they are large or small, need sufficient capital in order to meet their needs. The needs may be either operational or financial. The operational needs include buying land or other property, building of plants, purchasing of raw material and machinery, hiring of personnel etc. Whereas the financial needs include the availability of cash for paying to vendors, creditors and meeting day to day expenses. In the presence of a number of expenses and financial needs, it is almost impossible for the businesses to operate themselves solely by their own personal equity. Hence the need for credit or financing to arise, eventually.
Nowadays, various financial institutions have been providing the facilities of credit to many businesses. There are number of measures and tools designed to receive loans from these institutions. These financial institutions include banks, brokerage houses, investment companies, government etc. As far as the private limited business entity or even sole proprietor is concerned, there are several alternatives available to access the credit offerings offered by these financial institutions. No matter which financial institution you are planning to get credit from, you are required to possess a good credit report for your business.
A credit report is a piece of paper that is maintained to make the record of business’s past credit history i.e. its previous borrowing and repayment record. It also gives information about the company’s performance in terms of meeting it's credit obligations on time and the degree of its bankruptcy. Hence credit on credit reports are considered by all the creditors. The bad credit on the credit report can affect the company’s reputation and it might become difficult to get loans from creditors. The creditors, after seeing the bad credit on a credit report, also charge higher interest rates than usual, because of higher risk. Sometimes it also happens that the credit information appearing on the credit report is inaccurate and there is a need to remove it.
Tips and comments
Usually, it is assumed that bad credit information on the credit report cannot be omitted before 7 or 10 years, however, it is possible to remove bad credit on a credit report by a specific legal procedure. First, the business needs to access the copy of its credit report from a public credit rating agency or publically authorized credit rating agency. In Pakistan, SECP (Security and Exchange Commission of Pakistan) is authorized to do credit rating for different institutions. Then, the bad credit on credit report that needs to be removed, must be analyzed and evaluated thoroughly. Special focus must be the delinquent accounts. Lastly, a letter is written to the credit rating bureau to challenge the in accurate credit on your credit report. The credit rating bureau will contact your debtors for their confirmation. After that, the information can be removed.
In case the credit bureau does not succeed in fulfilling your requirement, you can then adopt “disburse for delete” approach by contacting your debtor and paying for the deleting the accounts that have never been paid off. All this should be recorded in a written agreement as well. After that, your bad credit on your credit report will be deleted within 60 days.