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Changing Your Business Name? Don’t Put Your Credit At Risk

Changing your business name is a hassle. But can it harm your company’s credit?

Kimberly Wilson will learn In 2006, she founded First Step Therapy, counseling, and training business. She took a break from her business to earn her doctorate; now she’s ready to relaunch. Her new company name reflects her new vision. First Step International Consulting & Counseling Services will train individuals, businesses, and professionals.

Changing Your Business Name? Don't Put Your Credit At Risk

She’s worried about her business credit after changing her name. She feared losing her business credit rating if she kept the same federal tax ID but changed her name. “How can I stop that?”

Wilson’s first business built her credit. She established business credit by buying supplies or printing on net 30 or net 60 terms. As her business credit improved, she could access more credit. She financed computers and other equipment with business credit.

The more experienced you are, the better.

Wilson is correct to be concerned about her credit history, as age is a significant factor in business credit scores. Several scoring models use various methods to gauge an individual’s age:

  • How long has the business been in existence? –
  • In what year was the first file created?
  • What is the average age of all of the accounts in the system?

Businesses that have been in operation for longer and have longer credit histories have a better chance of succeeding than newer businesses that fail within the first few years of operation.

When Wilson decides to change the name of her company, she won’t be forced to give up her established business credit history. This is excellent news. However, it is a smart move on her part to be proactive because doing so increases the likelihood that her full credit file will follow her company after it is established.

Instructions to Follow

Several steps can help you avoid Kimberly Wilson’s situation:

Changing your name? Tell the IRS. The IRS website has instructions.

State and local agencies need your updated name. If you registered your business with the state Department of Corporations or needed a local business license, you may need to update your business name.

Inform creditors. Tell your creditors about your name change so they can report your account under your new name. This may help link your old credit to your new business, but it’s not guaranteed. Do the same with credit card processors, your bank, etc.

Whenever necessary, notify the credit bureaus. The major commercial credit agencies have clarified their policies and procedures regarding a business name change.

  • Dun & Bradstreet doesn’t require name changes unless there’s a change of ownership. If so, visit D & B’s free company update page.
  • Small business owners can update their Experian reports at BusinessCreditFacts.com.
  • Name changes aren’t reported to Equifax. So long as the business uses the same credit accounts and tax ID number, reporting members will use the new name. The business credit report will show the previous name, just like a personal credit file.
  • Name changes aren’t reported to LexisNexis.

“Information on small businesses is in constant flux as they change locations, evolve into new entity types (e.g., sole proprietor to LLC), change leadership, grow assets, and more,” says Ben Cutler, Senior Director of Small Business Risk at LexisNexis. Small businesses often change their DBA or name. LexisNexis Risk Solutions relies on its Big Data technology and sophisticated, statistically-based record linkage models to uncover and combine these footprints across billions of data records.

Check business credit reports. Review your business credit reports before a name change to see which accounts report, then monitor them afterward to see if they report under your new name. If not, you can ask your creditors to report your accounts under your new business name.

There are many more steps to navigate a business name change, but with proper planning, you should be able to keep your credit history.

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