When I discuss the merchant account underwriting process with prospective clients, I mention that their credit rating will be assessed.  Invariably, prospective clients wonder whether their score will merit application approval.  At the risk of encroaching on one's privacy, I quickly add that underwriters generally look for at least a credit score of 550 for retail accounts, and a score of 600 for Internet or MOTO (mail order, telephone accounts).
 
Today, an e-commerce business owner proudly announced that his 700 score would preclude an
application decline -- a correct assertion as 700 is well over the underwriting approval threshold.  In general, a 700 credit score is very good, reflective of a person's perceived creditworthiness or "trustworthiness" in making payments to repay a loan or settle any debt.  But while a 700 score qualifies the merchant to open a merchant account, such a rating, for example, may not enable this business owner to secure the lowest mortgage interest rate.  Indeed, a higher 800 score could shave an extra percentage point or two off the mortgage interest rate.
 
It is obviously desirable, therefore, to raise one's credit score to its optimum capacity, 850.  (This may not be realistic.)  But one should try to move as far away from the lowest score of 300 as possible to avoid being declined for any loan and/or paying the highest loan rates.
 
One's given credit score, typically known as a FICO score, is not static.  It can move in any direction.  For instance, even missing two credit card payments with maxed out cards can decrease one's FICO score by 100 points.  Conversely, paying bills on time will enhance one's score.  Who are the powers that be -- the influential parties that determine credit rating? 

Surprisingly, there exists only three major credit bureaus: Equifax, Experian, and Trans Union.  Each employs its own mathematical algorithms based on a standard comparison scale where financial information details between individuals can be contrasted. Think of this system as analogous to the one employed by a teacher, grading on a curve.
 
Predictably, the most important criteria when cranking the credit score numbers involve an individual’s payment history.  The credit bureaus’ mantra: Those who forget history are doomed to repeat it.  It is anticipated that those who have been tardy with payment in the past, for example, may very well submit late payments in the future.  Information and fact-finding is gathered through one’s credit card use, retail accounts, and review of payments that are late or not paid, including the frequency and severity of the delinquency.  Do you have any judgments, suits, liens, wage attachments, and/or collection items against your name?  Think of these as “mistakes” and your calculated score will decrease.
 
In determining an individual’s credit rating, one’s outstanding debt is considered.  The total amount owed to creditors and lenders is assessed, weighed against one’s available credit limit.  If your credit cards are maxed out, another loan may not be available to you.  The credit card bureaus factor the total outstanding debt and the number of existing outstanding debts.
 
Bonnie Souza, owner of Credit Score Rebuilders, a company specializing in improving individuals' credit scores, adds, "A simple rule of thumb to keep in mind is - don't charge your credit cards any higher than 33% of the available limit.  If it is not possible to do this, you will see an increase in your score."  
 
Other credit rating criteria include the following: The length of time that one has borrowed money from any loan source, the number and types of loans secured (e.g., credit card debt, car loans, mortgages, installment loans, etc), and new credit applications or inquiries.  Alas, if you are looking to secure many different loans, your credit score will be adversely affected to a greater extent than trying to secure one loan.
 
Predictably, the best way to improve your credit score, is to pay off debt in a timely fashion.  Of course, it is also advisable to periodically review your credit report lest there be errors on it.  If you do spot an error, point it out as soon as possible to the creditor and the credit bureaus, providing written documentation.  It is well worth the expenditure of time and effort to do so.
 
Ms. Souza offers the following caveat if one engages in a self-directed effort to contact the bureaus : "Under state and federal law, you have the right to dispute inaccurate information contained in your credit report. However, according to federal law, the credit bureaus can ignore your dispute under a variety of conditions.  In our experience, a large part of dispute letters sent directly from consumers is rejected for one reason or another.  We liken it to fixing your automobile when it isn't running correctly; you have every right to fix it on your own but most often you bring it to a professional who will save you the time, aggravation and bruised hands!"
 
While it is advantageous to improve one’s credit score and perhaps work with companies that specialize in the field, exercise caution when companies promise to immediately inflate one’s credit rating.  It takes time for one’s score to march on an incline, especially understandable in light of the aforementioned criteria used.  
 
The merchant who had a 700 credit rating told me that his score was once under 500.  He simply became a much more dependable borrower.  You, too, can take steps on a credit repair program in an effort to secure loans at the best rates.  As the expression goes, “The best ability is dependability,” and you will be rewarded for assuming a dependable role with lenders.  
 

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To learn more about our merchant account services, please visit us at http://www.intelli-collect.com. 

One of our clients who owns a winery needed to expand his credit card terminal options by adding a tip line, enabling his customers' to tip servers.  Consequently, he called our technical support staff to faciliate this process but was told that he needed to change his business's "sic code."  "What is a sic code and how do you change it?," he inquired.  When I found out about his question, I thought it should be addressed via this blog.

The Standard Industrial Classification (SIC) code is a simple designation, classifying any type of business by a four digit code.  Our federal government is responsible for the coding system, and all economic fields are represented.  The first two digits represents the major industry group, while the remaining digits provide more specifics as to the nature of the business.  Of course, the major cardholding associations utilize this system, and merchant account providers must assign every accepted merchant with his/her appropriate sic code.

Well, the sic code is appropriately assigned if the merchant describes his/her business appropriately.  Now my friendly client merely wrote the word, "winery" on the application in the section "merchandise / service sold."  Our parent company did not know that this establishment also offered food.  Hence, the designated sic code did not represent the nature of his business.  

While an incorrect sic code is applied from time to time in the merchant account field, it may not present a problem to a given merchant in the automated world of credit card processing.  However, in this particular example, an erroneous code precluded adding a tip line.  Only certain businesses that, in turn, have certain sic codes, can utilize a tip line option.  This merchant was sic code-challenged.

This brings up the natural point of how to change an incorrect designation.  The merchant, with the help of his dedicated agent (me, in this particular example) points out the error to the merchant account provider.  The provider can then reassign the sic code to its correct 4-digit representation, rebuild files, and help the merchant to download the credit card terminal.  A happy ending ensues and the merchant can go on to business as usual.

The lesson of the story: When filling out a credit card processing application, do not provide a general description of your business.  Provide particulars and be explicit with what you sell or market.  This ensures that your business will be coded properly and prevents future processing problems.  (Two drum beats in the background) ... You don't want to get sick over your SIC.)  

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To learn more about our merchant account services, please visit us at  http://www.intelli-collect.com.

I received a call today from a very concerned client who told me about an unpleasant incident that transpired between one of his employees and a customer.  Apparently, the customer was asked by the cashier to indicate her phone number and home address on a credit card slip.  The customer adamantly refused, citing an invasion of privacy. 

The cashier maintained that she was simply following the store policy that required such personal information when high ticket items were sold.  The customer maintained a "Who cares" stance and gave the ultimatum that the sale would be lost if the cashier continued to badger her for this information. 

At the time, the owner was not in, and concerned about any possible repercussion from her boss, the cashier did not deviate from the store policy.  As expected, the sale was lost.

The owner did not blame or rebuke the cashier for the lost sales.  She was, in essence, just doing her job and following instructions.  However, the owner was surprised when I told him that such a directive was out of compliance with Visa, MasterCard, and American Express stipulations.  Indeed, businesses cannot require customers' personal information as a condition of a credit card purchase. 

Some states unequivocally forbid this practice and have instituted laws against it.  These states include: California, Delaware, Georgia, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, and Wisconsin.  The locale of Washington D.C. has also prohibited the practice of recording customers' personal information.

I reassured the owner that he need not worry about legal problems ensuing from this conflict.  What are the chances that the customer even knows about the relevant law -- unless she reads this blog entry?  (Unfortunately, the incident occurred in California so the owner is not out of the woods yet.)

I asked the merchant to refrain from this practice in the future.  After all, as long as the cashier checks that the customer's signature matches and then proceeds to gain an authorization number once the card is swiped, payment is guaranteed to follow. 

Merchants across the country -- from those who have a California merchant account to a Wisconsin merchant account -- are advised to refrain from making any sale contingent on whether the customer offers personal info on a credit card sales slip.  Merchants who violate this practice should probably not tell the authorities about their violation. :) Please, just don't do it again!

To learn more about our merchant account services, please visit us at  http://www.intelli-collect.com.