Detecting Fraud: 6 Things You Should be Checking Before Extending Credit

Fraudulent companies are on the rise in today’s society. Between E-Commerce websites and start-up businesses operating from a house, it is becoming harder to identify the legitimacy of businesses. Extending too much or too little credit to businesses is already a daunting task for credit managers and businesses alike, but adding the increase of fraudulent business is enough to drive a person mad (or cost someone their job).


 Below are 6 recommended things you should do before extending credit:

1.) Validate the Business Location- Can you find the business on Google Maps satellite view? Is their location appropriate for business? Is the address a mailbox service or residential? Answering business location questions confirms (or denies) the validity of the business you are researching.

2.) Credit Application- When looking at the potential debtor’s credit application, it is important to confirm the contact and reference information, entity and ownership information and legal terms and conditions.

3.) Confirm Phone Numbers- Call to see if someone professionally answers the phone with the company name and you actually reach a person! Also, it could be a mobile number if the business is small, but confirm that it is the main number for the company.

4.) Confirm Trade Credit References- Use the internet to find phone numbers of the companies who reported on your potential debtor. This helps to prevent conspiracy references.

5.) Visit the Customer’s Website- Locate the email and website address to make sure they match and find the phone number on the website. Does this information match what is on the credit application?

6.) Validate the Entity- Go to the Secretary of State’s website for the company that you are identifying. Search under “Business Entities” for the company. Is the company a LLC or a Corporation?


By implementing these 6 tasks into your procedure for extending credit, the chances of lending to a fraudulent company could decrease. Our reports offer Fraud Flag and Google Map Geocoding verification options to help assist you with the 6 suggestions above. 

A fraud flag appears on a business credit report for the following reasons:

  • The mailing address is residential, a postal delivery facility or unknown
  • The name and address no match the U.S Post Office files
  • The phone number belongs to a cell phone
  • The phone number area code does not align with the company mailing ZIP code
  • The phone number is not registered to the company
  • The company have been in business for less than one year
  • There is no corporate registration on file
  • The company has zero trade payment experiences
  • Days beyond terms is over 25


Google Map Geocoding is also included in our reports and allows you to visually see the company you pulled a report on and gives you the coordinates of its location. For more information on detecting fraud, our fraud flags or Google Map options, please contact us! We are more than happy to help!