How Long Will a Defaulted Merchant Cash Advance Haunt My Credit?

On your business credit reports there is no legal time limit at all. In practice, Experian keeps collections and judgments on its file for 6 years 9 months. If they reach your personal credit reports, which happens in some cases, generally they follow the 7-year rule and drop off after 7 years.

A defaulted MCA can come with a collection notice, a judgment, late payments, and a public UCC filing - all of which may appear on your reports. Each one of these is a separate event, and has its own clock. They can all hurt your business scores and your access to funding.

How Long It Stays Depends on Who Is Reporting It

The legal time limits on credit bureaus and how they can use data generally do not apply to business credit reports. Your personal rights over your credit report, for the most part, do not extend to business credit reports. It is entirely up to each bureau as to what their standards are. It is an important distinction that bureau policy is voluntary and it is not law. This also means that there is no free report annually, and no deadline for business credit bureaus to answer disputes. But no report sits on your file forever, either.

UCC filings automatically go off the public record after 5 years, but they can be continued. This is a public record that is shared with credit bureaus and can appear on your business credit report. Lenders can keep your UCC around longer by filing a continuation in the last six months before the five-year limit is up. Experian keeps UCC filings on file for 5 years. Equifax does not report UCC filings at all.

On business credit reports, collections sit on your credit file for as long as the bureaus want. Experian, for example, keeps collections on file for 6 years 9 months. Equifax skips third-party collections altogether. Your funder can mark the account “in collection”, though.

The MCA won’t forget anytime soon, of course. If it sues and wins, the judgment goes public, and as a public record, it hits your business credit report with both barrels. Experian keeps judgments on file for 6 years and 9 months. Equifax generally keeps them on file for 7 years from the date of filing. Dun & Bradstreet removes judgments after 10+ years inactivity.

Just a missed payment can go a long way and stick around for quite a while. Experian trade data goes back 36 months. Equifax tracks missed payments for 24 months. Dun & Bradstreet scores generally look at your payment data from the last 24 months.

Business bankruptcies are a different matter. Experian keeps them for 9 years and 9 months. Equifax generally keeps them for 10 years, or 7 years for Chapter 12 and 13. In the case of a personal bankruptcy that impacts your credit file, Chapter 7 stays for 10 years and Chapter 13 for 7 years.

Your Personal Rights Apply

If a lender goes after your personal report over a business debt, your personal rights apply. Generally a collection or charge-off can stay on your report for up to 7 years. The clock starts from 180 days after your first missed payment, and it is not restarted when the debt is sold. There are exceptions to the 7-year rule. A credit deal for $150,000 or more is not subject to the 7-year rule. Also, civil judgments are no longer on your personal credit reports as of July, 2017.

Your business credit info is not in your personal credit reports, but business scoring models like blended versions of Experian’s Intelliscore Plus or FICO’s SBSS Score can tap into personal credit data. You’re more likely to see this one early on, when the business has very little credit of its own.

Naturally, a judgment can outlive the time limit on your report. In New York, a judgment is presumed paid after 20 years. However, any payment or signed acknowledgement re-starts the clock, and your old judgment has a new lease on life. Since August 30, 2019, New York bars filing a confession of judgment against any business with no place of business in the state.

Your score’s impact from the negative entry typically decreases over time if you continue to pay on time. It’s hard to make an accurate judgment vanish. Paying it off can’t hurt, and it is worth asking the creditor to mark it satisfied.

Unlike your personal credit reports, business credit reports are available to anyone willing to pay for them, which is of course any potential lender. Always pull your reports from all three bureaus at least quarterly. Keep in mind that different lenders may look to different bureaus. Dispute any errors with each bureau. They do not share. When disputing, contact the bureau first. They may ask for supporting documentation and proof, but it is not required. The bureaus generally investigate within a month but they don’t have to by law. Follow up. Keep copies of all communications, with dates and times. If you can not make headway, try going to the party who originally reported it and ask them to make it right.

Closing shop does not close out the business credit reports. If you start a new business, it ideally should be a separate legal entity with its own tax ID.

Whatever the bureau and whatever the item, they all have a clock. Time is the best friend you have here. Scores care more about what you’re doing lately and less about what you did in the past.

MCA funders do not uniformly report to business credit bureaus. Some do. Some do not. The UCC lien, which is a public filing, appears on the business’s record regardless of whether the funder reports to a bureau. The lien tells subsequent lenders that someone else claims priority interest in the business’s receivables. That signal persists until the lien is released.