Understanding your business credit report is vital to building and running a thriving business. If you’ve ever applied for a mortgage, credit card, or other personal financing, you’re likely familiar with personal credit reports and scores.
However, many established business owners and new entrepreneurs alike lack that same familiarity with and knowledge of business credit. In fact, some may even be unaware that business credit reports and scores exist at all. Just as a personal credit report reflects your creditworthiness as an individual, a business credit report illustrates the creditworthiness of your business.
Gaining a solid knowledge of the information in your business credit reports is paramount to the success of your business, especially because a strong credit rating can boost your borrowing power or even enable you to obtain more favorable financing terms.
Keeping on top of your business credit report with regular analysis and monitoring can also help you avoid fraud and correct errors that could keep you from obtaining the funding you need. At the same time, business credit reports differ from personal ones, and can present information and terminology in ways that may be difficult to understand. In this post, we’ll cover:
What a business credit report is
How to check your business credit score
Where to check your report
How to analyze your business credit report
What you need to understand about it
How you can monitor your business credit
What is a business credit report?
A business credit report is a document containing background information about your company’s structure, industry, and financial performance. The business credit report generally contains a business’s payment history, past credit inquiries, and information pulled from public records, such as collections, bankruptcies, liens, and other legal judgments filed against the company.
This report also contains a business credit score, which provides a numerical assessment of your business’s creditworthiness and its handling of money in the past. Lenders, suppliers, customers, and other businesses can check your business credit report and use the information it contains to make decisions about whether to do business with or lend to your company.
How to check your business credit report
Many people are hesitant to request a copy of their business credit reports out of concern that doing so might negatively impact their credit score. However, checking your business credit report does not affect your business credit score. This is because checking your own business credit report is considered a soft inquiry. Soft inquiries do not affect your business credit score and are not shared with potential lenders.
There are three main business credit bureaus that compile business credit reports: Dun & Bradstreet, Experian Business, and Equifax Business. These bureaus gather information, create business credit reports, and use proprietary scores to evaluate a company’s risk profile.
Your score is then determined by aggregate data the bureau collects from banks, vendors, trade associations, business credit card companies, and sometimes even information you’ve self-reported. Your business credit score can vary from bureau to bureau, so it’s a good idea to occasionally check all three. Here’s how:
Dun & Bradstreet
Dun & Bradstreet rates companies on several unique factors that reflect a company’s current and future credit risk. The main rating is the PAYDEX® score, which measures a business’s payment history on a scale of 1-100. A score of 1–49 indicates a high risk of late payment, 50–79 indicates moderate risk, and 80–100 represents low risk.
How to get a Dun & Bradstreet credit report
To view your Dun & Bradstreet credit file, you’ll need the CreditBuilder™ Plus product, which costs $149 per month. Signing up includes a D-U-N-S® Number, which is how Dun & Bradstreet will track your credit history. Along with your full credit file and score, you’ll also be able to add positive payment experiences to your file and dispute inaccurate information that appears on your report.
Experian collects business information, payment history, debt collection history, and financial information to generate a business credit score. Experian’s Credit Ranking Intelliscore ranges from 1 to 100, with 100 being the best score possible.
How to get your Experian business credit score
You can purchase an Experian CreditScore℠ Report for $39.95. However, to get the report that includes tradeline history (a “tradeline” is simply a record of activity for any type of credit extended to your business), you’ll need to upgrade to the ProfilePlus ReportSM for $49.95. They also offer a subscription service that starts at $189 a year.
Equifax uses payment trends, credit history, and public information to determine a business’s creditworthiness. While most credit bureaus will provide you with a single credit score between 1 and 100, an Equifax business credit report provides you with three different scores. The payment score is your typical credit score. This is a number from 1 to 100, with 100 being the best score.
A business credit risk score represents the likelihood of a business being over 90 days late on financial obligations. This score ranges from 101 to 992, with 992 being least likely. A business failure score represents whether a business will go bankrupt in the next 12 months. Scores range from 1,000 to 1,610, with 1,610 being least likely.
How to get an Equifax business credit report
Equifax reports are available on their website starting at $99.95 per report.
Note: Pricing for Dun & Bradstreet, Experian, and Equifax credit reports are current as of publish date and are subject to change.
How to analyze a business credit report
Although the information in your reports should be the same, every bureau organizes it differently. However, any business credit report you obtain will likely contain some or all of the following key components:
Company profile: This is generally a high-level snapshot of your company along with a unique bureau-assigned number that ties the correct business to the information on the report.
Business information: Depending on the bureau, the report may also include information about your business’s facilities and branches, financial information (including financial statements, if available), and owner(s).
Tradeline payment history: This section contains your business’s payment history for the last three years. It can include payments to creditors, suppliers, and more. The information supplied in the report ranges from the payment terms, the monthly payment amount, the date of the first report to the credit bureau, and whether the account is current or delinquent.
Public records: Business credit reports may include publicly available information on both the company and its owner(s). Typically, this includes bankruptcies, judgments, liens, and Uniform Commercial Code filings. Depending on the credit bureau, this section may also include the status and dollar amounts for each.
Business credit score: The credit scoring range can vary from bureau to bureau, but a report should always contain a clear credit score that’s simple to comprehend. The report should provide a transparent indication of your business credit risk level, the factors used to determine your score, and sometimes, a forecast of the future credit risk of your company based on your report.
Inquiries: Equifax Business and Experian Business list inquiries on their credit reports, but Dun & Bradstreet does not. Inquiries occur when other businesses check your credit report, either as a lending decision or while they regularly monitor your business.
With this in mind, we’ll walk you through the way to analyze your business credit report.
When you check your business credit report, don’t miss these steps.
Verify your company information.
- Your basic company profile and NAICS and SIC numbers should be correct and up to date.
- If the report lists the wrong business, the information is wrong or outdated, or the NAICS and SIC numbers misclassify your business, your credit report could be based on incorrect information.
- That can impact your score and any lending decisions.
Check your score.
- Dun & Bradstreet – D&B has five different indicators that reflect current and future credit risk. The most commonly used rating is the PAYDEX score. This score ranges from 0 to 100, with 100 indicating a business with the lowest credit risk. In addition to the PAYDEX score, D&B has a delinquency score, a failure score, a D&B rating, and a viability ranking.
- Experian – Experian business credit reports produce an Intelliscore that ranges from 0 to 100. Anything above a 76 is considered a good score, with 100 being the lowest credit risk. Experian will analyze a company’s payment history, public records filing, credit inquiries and usage, and general business information to determine the score.
- Equifax – Equifax generates two business credit scores. The Business Credit Risk Score assesses the likelihood of a 90-day severe delinquency or charge-off (the term used when a lender or creditor has written off the account as a loss); the Business Failure Score predicts the likelihood of a business failing. Both scores reflect any bankruptcies, liens, judgments, on-time payment history, and more. The two scores will also show your 12-month payment trend and compare that to the industry average. The Business Credit Risk Score ranges from 101 to 992 while the Business Failure Score ranges from 1,000 to 1,610, and within each of these ranges a higher score indicates lower risk.
Check your account information, payment history, and public records.
- Lenders, suppliers, and other entities who are checking your business credit report will pay close attention to the information here and use it as a basis for their financial decisions.
- Double-check the account information, UCC filings, and any negative information listed, such as delinquent payments, tax liens, and bankruptcy filings.
- Compare the information against your records to make sure it’s correct.
Focus on problem areas.
- Credit reports typically spell out the rationale behind your score, which can help you understand which problems to focus on.
- For negative information that’s accurate, you’ll have to wait out the clock until it falls off your report — and this timing is different for each bureau.
- Until then, work on building strong business credit by making payments on time (or early), borrowing from lenders that report payments, and keeping your personal and business credit separate where possible.
Dispute errors or report fraud.
- Business credit reports are not always factually correct. In fact, 25 percent of small business owners who checked their business credit reports found errors that made the business appear riskier.
- Business identity fraud is another problem, and small businesses alone lose $8 billion a year due to this type of crime.
Are there free options to view business credit reports?
One way that business credit reports and scores differ from personal credit is their availability. While consumers are entitled to receive a free personal credit report annually, it’s not quite as easy to access a free business credit report, as you’ll generally need to pay for the information.
You can do an online search for “free business credit report,” but beware of scams. Ensure you only share your information with a reputable website or company.
That said, if you want to get a basic summary of your business credit or start tracking changes to your business credit scores, there are a couple of free options. Note that free services will not provide you with a full copy of your business credit report but rather a summary and other free tools to help you build and improve your business credit. Below are some free services to explore:
Credit monitoring service Nav offers a free summary of Dun & Bradstreet, Experian, and Equifax business credit reports and scores when you create an account. It’s free to create an account, however, it’s important to note that this service does not include a full credit report.
The CreditSignal service from Dun & Bradstreet provides you with free alerts when your scores or reports change, but doesn’t give you access to your detailed credit report. It’s free to sign up, however, alerts are only available for free for 14 days. After that, you’ll need to upgrade to a paid service.
Understanding your business credit report
Ultimately, as a business owner it’s crucial to keep an eye on and actively monitor your business credit reports. After all, your business credit history and score can play a pivotal role in who you work with and whether or not your business will be approved for loans and other forms of financing in the future.
While each business credit bureau calculates credit scores differently, there are a number of factors that generally impact your business credit score. Payment history is among the most significant, as it can indicate how likely you are to make payments, on time, in the future. Other key factors that may impact your business credit score include credit history length, total debt you carry, business industry, and company size.
Your business credit reports and scores are incredibly important if you plan on working with other businesses or borrowing money in the future. However, it’s worth noting here that the importance of your credit score continues to evolve. While many traditional lenders still rely on your business credit to determine whether you’re a responsible borrower, there are alternative lenders, like Fundbox, that also assess metrics beyond your credit score.
This might include, for example, alternative factors such as your length of time in business, revenue, and industry. So while your credit is important, it’s just one of many factors to keep in mind when planning your financial future. But it’s still best practice to regularly review your reports and scores. Getting into this habit can help you catch fraud, and understanding your credit can take your business further.
Learn more about credit scores in our guide to business credit where we give additional advice on how to grow and maintain your credit score.
Disclaimer: Fundbox and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.