What is a business credit report?
Business credit reports are records of a business’s credit profile, which includes scores, ratings and other data that demonstrates the business’s reliability to pay back creditors, vendors and lenders and financial stability. Lenders, investors, the government, as well as potential partners, will pull business credit reports to get insight into the financial health and pay experience of a company.
Who provides business credit reports?
There are many business credit bureaus that provide business credit reports, but the largest and most significant of the bunch are Dun & Bradstreet, Experian, and Equifax. Each business credit reporting agency uses similar information but because they all operate separately and report credit data differently, business credit scores can vary depending on which business credit report is ordered. All or one of these business credit reports are used to assess a business’s payment habits and financial responsibility.
What data is available in a business credit report?
Business credit reports provide business credit scores and ratings that are based off the following types of data:
- General company data
- Industry data
- Payment information/trends
- Debt ratios
- Financial data
- Public record information
- SIC codes/NAICS codes
What can negatively impact the score in a business credit report?
All the commercial credit reporting agencies will report delinquencies and negative data which will impact a business’s credit score. Therefore, accuracy is very important to business credit profiles as the slightest company record error can be detrimental to their business credit score.
Some of the information that may weigh poorly on a company’s credit scores are:
- Charge-offs
- Collections
- Lawsuits
- Judgements/filings
- Bankruptcy filings
- UCC filings
- Liens
- Debt-ratios
- Payment trends
- Excessive inquiries can impact your business credit scores – this is especially true with Experian Business.
Even inaccurate or out-of-date company information can hurt the standing of your business credit reports and scores. Business credit is unregulated, it’s very common for false data to land on company reports from another firm with a similar name or in the same industry. It is also common for certain industries to experience more of an impact to their credit than others.
When lenders view your company profile(s) they should see valid information that shows a stable and viable company who can handle taking on additional orders or expenses without becoming financially stressed.
What are business credit reports used for?
The information gathered, analyzed, and quantified in your business credit reports is used by creditors, leaders, vendors, and anyone you currently or may do business with. It can even be used by your competitors who may hand a copy of their business credit reports when competing for a bid. If they know your business credit is less than stellar at the same time, it is to their advantage to bring light to their excellent business credit scores. Scores and indexes are used to predict the financial stability and reliability of a company. Creditors will want to see healthy scores and a record of good payment habits before offering a line of credit, loan, or payment terms. Anyone can check business credit scores and reports, even competitors, to learn insight on a business’s financial standing.
Business credit reports are used by other businesses trying to decide on whether or not to work with you, and on what terms. Business credit reports can be used to make decisions about:
- Financing
- Equipment leasing
- Business loans
- SBA loans
- Factoring
- Credit extensions
- Payment terms
- Commercial insurance
- Investor relations
- Government bids
- A winning edge over the competition. Companies are often judged by their credit score, and a healthy one reflects a financially sound and successful business. This can make the difference when competing for a bid/contract or acquiring a new business-to-business customer.
What do I need to know when building my business credit profile?
Business credit profiles often contain a lot of details, but there are many factors to consider when focusing on business credit building.
- Unique algorithms and metrics: Business credit is reported separately and differently than personal credit.
- Not all vendors report: It’s possible to have multiple vendors and still have no established business credit.
- Business credit profiles can be checked without prior consent: Anyone can order business reports to gain knowledge about a company’s payment habits. Businesses can miss out on profitable opportunities and have no knowledge of it.
- Both your business and the owner’s personal credit matter: Most lenders and creditors will want to see both the principal’s personal credit and the company credit reports/scores. If you’re seeking an SBA loan or some traditional bank loans, your FICO SBSS Score will be used for screening the application.
Keep in mind, there are a handful of other business credit bureaus that may impact your company depending on your industry and which lender you’re using.
Our business credit repair & monitoringclients understand how vital it is to reflect consistency in their business credit profile; they are comforted knowing that our credit experts are working to fix and monitor their profile on a daily basis. If you would like to ensure that your businesses credit profile is reflecting accurate information and in good standing, please reach out to us for a free business credit review.