Education Library · Foundations · Article 7
A plumbing and heating owner running a company of about $6 million pulled up his business reports for the first time and found a lien from a bank he’d banked with for years. The filing had been open since 2016. Reading it off the screen, he listed what it covered: “all negotiable instruments, including proceeds, projects, products, all inventory, including proceeds and products, all accounts.” Then: “so they basically did an entire blanket lien on everything.” He also had a filing from a short-term lender he’d used to wrap his trucks, paid off on time but possibly never removed, and one bureau still had the company at an old address.
Errors that show up on personal reports
Personal reports are covered by the Fair Credit Reporting Act. The CFPB’s list of common errors includes these:
- Old or wrong addresses, names and phone numbers, often addresses you haven’t used in years.
- Accounts that aren’t yours, from someone with a similar name or from identity theft.
- Accounts listed twice, sometimes under a collection agency’s name as well as the original creditor’s.
- Wrong balances or limits. A paid-off truck loan still showing a balance, or a card limit reported low, which makes utilization look higher.
- Wrong status or dates, like a closed account showing open or an on-time account marked late.
You can pull your personal reports from Equifax, Experian and TransUnion for free at AnnualCreditReport.com, and the bureaus now offer that weekly.
Errors that show up on business reports
The most common business problem is a duplicate file. A company moves, changes its name or converts to an LLC, and a bureau starts a second record instead of updating the first. Payment history gets split, and neither file looks as strong as the business is.
Mixed files happen too. An electrical contractor who bought his company about three years ago found the previous owner’s old telecom company listed at the same address, along with accounts and filings from before the sale that still looked open. He had been told they were being closed out. As Paul put it on that call, it “could legitimately be that he has and the banks just dropped the ball.”
Wrong industry codes, wrong balances on reporting accounts, and paid accounts still showing past due round out the usual list.
What a UCC-1 filing is
When a lender takes collateral on a business loan or lease, it usually files a UCC-1 financing statement. UCC stands for Uniform Commercial Code, the commercial rules every state has adopted. The filing is public notice that the lender has a claim on certain assets of the business, and it sets the lender’s place in line if the business can’t pay.
For most LLCs and corporations, the UCC-1 is filed with the Secretary of State, or the equivalent office, in the state where the business was formed. Fixture filings tied to real estate are recorded with the county.
A UCC-1 is generally effective for five years from the date it’s filed. The lender can extend it by filing a continuation in the last six months before it lapses. Equipment loans usually describe the specific equipment. Many bank loans, lines of credit and short-term loans use much broader language.
Blanket liens on “all assets”
The UCC allows a financing statement to describe the collateral as “all assets” or “all personal property” of the business. That’s a blanket lien. It covers equipment, inventory, receivables, deposit accounts and future assets, whether or not the loan had anything to do with them.
Blanket liens are normal for a primary bank relationship and for many lines of credit. The trouble comes when they pile up or outlive the debt. A business with an open blanket lien from one lender has already pledged everything, so the next lender sees nothing left to secure its loan. Some lenders will want the first lien released, some will take a second position at a higher price, and some will decline.
Why lenders care
Underwriters search UCC records on almost every business loan. An open filing tells them who else has a claim, what’s pledged, and whether the business borrows from short-term lenders. Several filings from short-term lenders in a short period is a pattern some underwriters read as cash flow strain. A filing from a loan that was paid off years ago looks exactly like an open one until someone terminates it.
How to search your state’s UCC records
Most Secretary of State offices offer an online UCC search, often free for a basic search, with a fee for certified copies. Search the exact legal name as registered with the state, plus old names and any other entities you own. For each filing, note the secured party, the filing date, the lapse date and the collateral description. Then match each one to a loan you have or had.
UCC-3 terminations when a debt is paid
A filing doesn’t come off just because the loan is paid. The lender has to file a UCC-3 amendment, called a termination statement. Some lenders do this on their own after payoff, and some never get to it.
If a loan is paid off and the filing is still there, send the lender a written request to terminate it. Under the UCC, once a business makes an authenticated demand, the lender has 20 days to file the termination or send one to the business, as long as nothing is still owed and there’s no commitment to lend. Keep a copy of the payoff letter and your request. If a lender won’t respond, the rules on what a business can do next vary, and that’s a question for your attorney.
Disputing errors
For personal reports, the FCRA gives you a defined process. Dispute in writing with the bureau that shows the error, explain what’s wrong, and include copies of supporting documents. The bureau generally has 30 days to investigate. You can also dispute directly with the company that reported the information.
Business reports don’t have that federal process. Each business bureau has its own update and dispute procedure, usually online, and each one handles merges, address changes and incorrect tradelines separately. Fixing a record at D&B doesn’t fix it at Experian or Equifax. Lien problems get fixed at the filing office through a UCC-3, and the bureaus usually update their public records after that. Expect some of it to take more than one round, and check the reports again after the next reporting cycle.
This article is educational and isn’t legal, tax, accounting or lending advice. Program rules, lender terms and credit bureau practices change, so verify current terms before acting.
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