Business Credit: Using an EIN, DUNS or SSN?

At some point decades ago, someone on the internet told people they should ignore the words "Social Security Number" on business credit applications and instead put their company's EIN or DUNS number when filling in the blanks. Little could they have known what absolute chaos they would unleash far into the future for those who were innocent or foolish or desperate enough to follow their advice.

Unfortunately, the worst advice tends to stick around for a long time... and it seems to be making it's rounds again.

While an EIN, SSN and DUNS may just seem like nine little numbers, the implications of getting them wrong could be catastrophic to both you and your business. Your potential creditor's computer can't predict your intentions when filling in the blanks with the wrong information. The application asked for a specific set of nine numbers, and the computer confirmed the right amount of numbers were provided.

As you can see above, with the dashes removed, all three (EIN, SSN and DUNS) are comprised of nine numbers. But that is where the similarity ends. Their use and intent is vastly different, and they are NOT INTERCHANGEABLE in any way.

• An EIN identifies your business for tax purposes only.

• A DUNS number identifies your business for credit purposes only.

• Your SSN validates your identity and your personal credit.

More importantly, if you are trying to use one set of numbers where the computer is expecting a different set, you could be setting yourself and your business on a course that leads to federal charges, including identity theft and bank fraud.

Why do business credit applications require your social security number?

The PATRIOT ACT (enacted after the terrorist attacks of 9/11) requires every creditor who provides access to cash or capital to collect and verify the social security number of every applicant. It does not matter if you are a small mom-and-pop operating out of your garage or a huge multinational corporation. And while the law was passed in 2001, the requirement of gathering and verifying an applicant's social security number wasn't enforced to its fullest extent until 2020.

While this can tend to blur the lines between business-based credit and personal liability, the easiest way to verify an applicant's identity (and ensure the application is not an attempt at identity theft) is to complete a hard pull on the personal credit report. On the back-end, this benefits creditors because it also allows them to verify whether an applicant meets or exceeds the underwriter’s base criteria (such as a 629+ FICO score).

Will using my social generate a hard pull on my personal credit?

Yes, it may, depending on the type of inquiry the creditor pulls. In a lot of cases, the possibility of a hard pull on the personal credit can be a deterrent against applying, especially if you need to keep inquiries to a minimum. However, the benefits will likely outweigh the cost, especially if your personal credit can help prop-up an otherwise unremarkable (or unqualified) business credit report. But it can also be rewarding to the creditor because — after all — their goal is to get you approved any way they can, even if the approval is supported by your personal credit history.

What happens if I put my EIN number instead of my SSN?

What that internet poster and his millions of blind followers didn’t realize is that no computer system can gauge the intention behind the nine numbers typed into that credit application.

If the application is asking for your social security number and you type in an EIN, the computer doesn’t pop up with a warning saying "Hey! Wait! Are you sure that's your SSN?". It just accepts the nine digits as your SSN, just like it did for the other 10,000 applications processed before yours today. It doesn't realize that you just wanted your application to be processed using your EIN and not your social. The computer is going to pull the personal credit report for THAT NUMBER, believing it's YOUR social security number. When it turns out that none of the data matches to you, it will throw up fraud alerts on that person’s personal credit file, even though that was clearly NOT at all what you intended.

In the past, being lucky enough to have an EIN that matched the SSN of someone who had awesome personal credit scores may have been a boon, but the opposite was also true if the DUNS or EIN entered pointed to someone who had horrible personal credit!

Today’s complex identity verification systems are going to immediately flag your application as a deceptive back-end search of someone else’s SSN, and warn of potential fraud or identity theft. Not only will the application get summarily denied, but you may even be black-flagged from future applications with that creditor.

Can inputting the wrong numbers actually hurt my business?

The same goes for the DUNS number. If the application is asking for your DUNS number and you put in your EIN, a check of that DUNS in D&B's database will lead to a different company altogether and to a completely different principal. Bells and whistles will go off, possibly throwing both companies into an investigative status until the matter is resolved.

I know, because it happened to my own company. Someone put my company's DUNS number instead of his social, and three years later I am still receiving junk mail in his name. I had to launch a complaint to clarify the misinformation and that has locked my company out of any possibility of ever getting an approval for a Chase credit card. And all because someone not even related to my business listened to bad advice on the internet.

Why do some companies still promote EIN-based credit?

The internet is flush with companies who are still promising small business owners they can get "EIN-based" credit. It may take months and thousands of dollars before the business owner realizes he's been rooked. In reality, they are just trying to sell a "golden unicorn" service the only way they can: with misinformation. No matter what shortcuts you saw someone post to the internet or you were told by a sales rep, consultant or agent, you should ONLY input the right numbers on your application so your credit approvals are based upon you and your business, and without any red-flags attached.

Does providing my SSN mean the credit is personally guaranteed?

While I understand people's reluctance to provide a social security number, especially if they think it leads to personally guaranteeing the credit, but that couldn't be further from the truth.

When an application asks if you are “willing" to provide a personal guarantee, that willingness does not equate to a requirement. Providing your social security number does not automatically move an application into a personal guarantee status. It just means that the creditor wants to have other options available to them (and you) if your business credit report isn't strong enough to stand on its own merit. If there is no specific language “requiring” a personal guarantee, you should think of it as nothing more than a "second option" for your potential creditor.

Times have changed. The world is not the same place it once was. Procedures had to be put into place to try and stop bad actors from doing bad things in your business name.

Credit and credit applications are ever-evolving, and your business credit needs to move at the same pace. Remember — there are times when creditors need reassurance and, until your business credit report is strong enough to do it on its own, it may need a little help from you. After all — if you aren't willing to stand behind your business, why should they?

If you need assistance, call me now or click-to-chat

I offer both free consultations and paid services. If you need help to better understand your business credit report or get past a hurdle, feel free to give me a call (800-918-7505) or contact me via our online chat. I'm here if you need me.