Some Simple Guidelines for Deciphering Your Business Credit Report
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How To Read A Business Credit Report?
Having strong business credit can be the key that can help you qualify for business financing and get better repayment terms from suppliers. In this guide, we will try to explain how credit reporting companies use different factors to come to the same conclusion about the creditworthiness of your business. Learn how to read a business credit report.
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Business Credit Reporting Agencies
Dun Bradstreet D&B, Experian, and Equifax are the three business credit reporting agencies. They provide details of your business’s payment history with vendors and creditors, as well as other business activities. Each agency also gives your business a score measuring how likely it is to meet its financial obligations. Since it can be checked at any time, it’s even more important to understand what’s in your report and how your score is calculated.
Business Credit Agencies Scoring Models
Most people are familiar with the standard consumer credit model, with scores ranging from 300 to 850. Business credit agencies have different scoring models and sometimes give businesses multiple scores.
Banks and lending institutions tend to use Experian credit reporting Agency and Equifax but, since D&B primarily tabulates trade history and looks less at how your business has paid back banks or other lenders, D&B reports are preferred more by suppliers and less so by lending institutions.
D&B scores your business in 3 ways, your Paydex score is the 100-point score that most small business owners associate with D&B. The higher your score the better, with 80 being the cutoff for a ‘good business credit score.’ This score is based on how timely you’ve been with your bills and financial obligations to vendors that report to D&B.
D&B Financial Stress Score
The Financial Stress Score (FSS) predicts the likelihood of business failure over the next 12 months. In this case, the lower your score the better with the exception of zero which means out of business or bankruptcy. This score is not based on data about your business. It is a comparative measure based on the industry that your business is in, which helps to predict how your business will fare in the future.
D&B Commercial Credit Score Percentile
The Commercial Credit Score (CCS) predicts a business’s likelihood of becoming severely delinquent in its payments over the next 12 months. It is also a comparative measure, analyzing data from other businesses that have similar payment histories to your’s and seeing how often they were delinquent.
While D&B and Equifax primarily use payment histories to calculate your score, Experian takes into account a number of other factors, such as industry codes, time in business, and financial performance of the business. Ideally, you want to be in the 80-100 range. Experian may offer the most comprehensive and balanced score among the 3 agencies.
Business Credit Reports Reviews
You should review your report at least once a year. Inaccuracies in your report can be disputed directly with the credit bureaus. Unlike the consumer side of the credit report business, there’s no formal process for disputing errors on a business credit report. Every agency has its own guidelines and timeline for fixing errors. Unlike consumer credit reports, which you are entitled to receive free once per year, you generally have to pay to get a copy of your business credit report.
Remember, your business credit is just as important as your personal credit score when you are applying for a business loan. Owners and entrepreneurs who understand their business credit scores and have a professionally written business plan are much more likely to be approved when they apply for a loan!
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FAQs:
A business credit report is a document that provides an overview of a company’s credit history and financial health. It includes information on credit accounts, payment history, public records, and credit scores, helping lenders and suppliers assess the company’s creditworthiness.
You can obtain your business credit report from credit reporting agencies like Dun & Bradstreet, Experian, and Equifax. Visit their websites or contact them directly to request a copy of your report.
Review important elements such as payment history, credit utilization, public records (e.g., bankruptcies or liens), trade references, and credit scores to understand your company’s credit standing.
If you find errors on your business credit report, contact the credit reporting agency and provide evidence of the inaccuracies. They will investigate and make necessary corrections.
To improve your business credit score, pay bills on time, maintain low credit utilization, establish positive trade references, and ensure accurate information is reported to credit agencies. Building a strong credit history over time will help boost your creditworthiness.
