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Bill, the owner of a print shop in Chicago, had an impeccable credit history and a five-year track record of profits and growth.

When he needed a $250,000 loan for business expansion, he was surprised to learn the bank found several federal tax liens on his credit report. Although the information was incorrect, his loan request was delayed until he could prove the report was in error.

The personal credit report of a small-business owner plays an im- portant role in the credit decisions made by financial institutions. Banks, finance companies, and the U.S. Small Business Administration frequently obtain copies of a business owner's credit report as part of the credit-analysis process.

"Most lenders believe that in a closely held business, the company will be a mirror image of the way the individual conducts his personal life," says John Hostetter, a vice president for business banking at Norwest Bank in Colorado Springs, Colo. "Although the business and individual are two different entities legally, in reality the difference becomes blurred with closely held businesses. The personal credit report is a critical tool in evaluating the business owner's character and ability to repay the loan."

For a business owner, an error in a personal credit report can be a financial disaster. Once an error is found, the owner often must devote substantial time and effort to proving the information is incorrect. If the financial institution is not satisfied, an incorrect report may result in higher interest rates, requests for additional collateral, or stricter loan terms.

Also, many banks have centralized their lending operations, so the loan officer who rejects an application because of an unfavorable credit report--not knowing that it's erroneous-may be in a city far from the borrower's community and have no knowledge of the business owner's credit reputation.

Nobody knows how many credit reports are wrong, says David Medine, the associate director of credit practices for the Federal Trade Commission. "But I can say it is the No. 1 subject of complaint the FTC receives."

Before undertaking a major transaction, obtain a copy of your credit report from each of the three major credit-reporting companies--Equifax, Trans Union, and TRW.

If errors are found, apply the Fair Credit Reporting Act's guidelines for correcting credit problems. "The first step is to dispute the problem with the credit bureaus," says Ed Friedman, president of the Credit Repair Group, in Encino, Calif. "If the bureau can't resolve the problem, the next step is to contact the credit granter directly to see if it can resolve the problem."

Under agreements between the FTC and the three major credit-reporting companies, the credit companies, after receiving written notification, have 30 days to either verify the information or accept the individual's version. If the problems are unresolved by this process, individuals have the right to request that a 100-word summary of their own version of the disputed information be added to the credit file.

To obtain a copy of your credit report, contact the credit companies directly: Trans Union Credit Information, 1-800-851-2674; Equifax Credit Information Services, 1-800-685-1111; and TRW Information Services, 1-800-392-1122. Each credit company will request a letter with specific information. Equifax charges $8 for a report, and Trans Union charges $15; TRW provides one free report per year.

--Laddie Blaskowski

The author is a business consultant and writer in Colorado Springs, Colo.