Your Business Credit Report Explained

When you have a business, the right bank for your unique needs shouldn’t be the only thing on your financial to-do list. You should also be utilizing your business credit report and leveraging it for your business’s success. Just like everyone in the United States receives a personal credit report and credit score, so do businesses. The information from a business credit report is not only beneficial to have to check up on your business’s credit history and health, but can also provide you with a leg up when it comes to seeking further credit opportunities.

It's important to note that business credit reports don’t only apply to large companies. They can be created for a business of any size, so it’s widely advised that business owners keep tabs on their business credit reports and credit scores, as they are used in a lot of business applications and financial decisions.

We’re going to share with you all about what exactly is included in a business credit report, how your business credit report is compiled, why it’s important to your business, how to improve your business credit score and report, how you can access your business’s report, and how the report is used by other entities. Consider this article your one-stop-shop in learning all about your business credit report for business banking.

What is a Business Credit Report & What’s Included in it?

Do you religiously check your personal credit report every year? A lot of people actually don’t. A handful of popular apps, like Credit Karma, make it easy for people to check their credit scores, and many are competitive about it. However, only a third of people check their personal credit reports each year, according to Matt Schulz, chief credit analyst for LendingTree.

So, what about when it comes to businesses checking their business credit reports and credit scores? Believe it or not, some businesses aren’t even aware they have them! When is the last time you thoroughly checked your business’s credit report?

A business credit report is a compiled culmination covering your company’s past, present, and potential future credit accounts. A business credit score is created from the information from this report.

Your business credit report contains payment history, credit utilization, outstanding balances, public records, and company information. We will break down each of these features of a business credit report:

• Payment history: Overall, payment history shows how consistently a company pays its bills and debts. The payment history section of a business credit report will typically include a list of the company's creditors and the dates that payments were due and made. It will also include information about any late or missed payments, including the number of days late and the amount of the missed payment. The payment history portion may also include information about any collections actions or judgments that have been taken against the company due to non-payment of debts.
• Credit utilization: The credit utilization section shows how much credit a company is using compared to the total amount of credit available to it. This section includes a calculation of the company's credit utilization ratio, which is the amount of credit the company is using divided by the total amount of credit available to it. This calculation shows as a percentage.
• Outstanding balances: The outstanding balances section of a business credit report provides information about the amount of money a business owes to its creditors at a given point in time. It provides a snapshot of the company's financial obligations and its ability to repay its debts. The outstanding balances section will include details about the company's outstanding balances on loans, lines of credit, and other credit accounts. It may also include information about any delinquent accounts, such as accounts that are past due or have been sent to collections.
• Public records: This portion contains information about any legal or financial events that have been made public and are relevant to the creditworthiness of a business. These events may include bankruptcies, tax liens, judgments, and other legal actions that may impact the business's ability to repay its debts.
• Company information: This part of the business credit report has more than just the company’s name, address, and contact information. It also includes details about the company’s industry, size, and history.

How is a Business Credit Report Compiled?

A business credit report is compiled using information from the business itself, government records, credit bureaus, and other public and private sources. This information is obtained through self-reporting from a business, public records for the company, trade references from vendors and suppliers, and payment data from creditors.

Your business credit score is calculated using the following factors: payment history, credit utilization, length of credit history, public records (bankruptcies, judgments, tax liens, etc.), company size and industry risk, and amount of available credit.

Personal credit scores have a scale of 300 to 850, while business credit scores are on a scale from 1 to 100. The three major credit bureaus that create business credit reports are Dun & Bradstreet (D&B), Equifax Business, and Experian Business.

Why Is Your Business Credit Report Important?

Just like your personal credit report, your business credit report can bring you good opportunities or keep you from them, depending on the health of your score and report. Your business credit report is used by multiple entities to decide whether or not they should partner with you.

Here are the different entities that may utilize your business credit report and why:

• Banks and other lenders - Financial institutions may review your business credit report to determine whether to approve your application for a loan or line of credit, and what interest rate to offer you. They can also use the report to determine if you are eligible for higher-value checking accounts.
• Credit card companies - Credit card issuers may use your business credit report to evaluate your creditworthiness and determine whether to approve your application for a business credit card.
• Suppliers and vendors - Suppliers and vendors can use your business credit report to evaluate your payment history and determine whether to extend credit terms to your business.
• Insurance companies - Insurance companies may review your business credit report to determine your premiums for various types of insurance coverage.
• Landlords - Landlords might use your business credit report to evaluate your financial stability and creditworthiness when considering your business as a tenant.
• Government agencies - Government agencies may review your business credit report when considering your business for a contract or license.

A business credit report is important for other reasons, too. It not only can impact your access to future funding, but can impact possible future business relationships with vendors and suppliers. If you don’t have good business credit, they can decide not to do business with you.

A healthy business credit report and score can also bring your business several benefits that definitely pay off. If your credit health is in good standing, your business may qualify for lower interest rates when it comes to loans or lines of credit, and also qualify you for lower insurance premium rates.

In the world of partnering with any financial institution or business outside of your own business, your business credit report can basically help or hinder you.

How To Improve Your Business Credit Score and Report

As with anything, good habits practiced consistently improve your situation. The same goes for your business credit score and report. Here are key, strategic ways you can improve your business credit health:

• Pay bills on time: This one may seem obvious, but done consistently, it pays off. Literally. Paying your bills on time is one of the most important factors in building a positive credit history. Late payments can have a negative impact on your credit score and can make it more difficult to obtain financing.
• Keep credit utilization low: Maintaining a low credit utilization ratio (the amount of credit you're using compared to your credit limit) can help boost your credit score. Aim to keep your utilization below 30% of your available credit. Borrowing too much at one time may present to outside entities as a risk - they may view it as a possibility that you are in financial hardship.
• Monitor your credit report regularly: Regularly reviewing your business credit report can help you identify errors and inaccuracies that may be hurting your credit score. Dispute any errors you find to have them corrected. Checking your business credit report regularly is also simply just a good habit to get into for peace of mind.
• Establish trade credit: Building good relationships with vendors and suppliers and establishing trade credit can help build your credit history. Ensure that these vendors report your payments to the credit bureaus to help you establish a positive payment history.
• Maintain a positive payment history: Consistently paying bills on time and in full is one of the most important factors in building a positive credit history. Note the two key words there – on time and in full.
• Avoid opening too many new accounts at once: Opening too many new accounts at once can signal to creditors that you're taking on too much debt and can harm your credit score. This is another sign to them that you may be heading to financial distress.
• Maintain a healthy financial profile: Having a strong financial profile, including a solid revenue stream, cash reserves, and a solid business plan can help you build a positive credit history.

Consistently practicing these good credit habits over time will build up your business credit and let others know that you can be financially trusted.

How To Access Your Business Credit Report

Accessing and going through your business credit report is crucial to maintaining a healthy credit score and report and is good practice, so when the time comes to apply for further credit, buy a business space, apply at a bank, etc., there aren’t any surprises on your report.

Requesting Your Business Credit Report

As mentioned above, there are three major business credit bureaus you can obtain your business credit report from: Dun & Bradstreet, Equifax, and Experian. From each one, you can go directly to their websites and select the credit report you would like to order. Unlike personal credit reports, which you can access once a year for free from each of the credit bureaus, accessing your business credit report will cost a fee.

Which Credit Bureau To Access Your Credit Report Through

It's important to note that each credit bureau may have slightly different information in their reports, so it's a good idea to request reports from all three bureaus to get a complete picture of your business's credit history. However, accessing one credit report is better than none.

Here is what each bureau can offer you in regards to your business credit report:

1. Dun & Bradstreet (D&B) Report: This is one of the most widely used business credit reports and provides a detailed analysis of a company's creditworthiness. It includes a risk assessment score, payment history, credit limit recommendations, and other financial information.
2. Experian Business Credit Report: This report provides a comprehensive view of a company's credit history and includes information on credit utilization, payment trends, public records, and collections activity.
3. Equifax Business Credit Report: This report provides a detailed view of a company's credit history and includes information on payment history, credit utilization, and public records.
4. FICO Small Business Scoring Service (SBSS) Report: This report uses a scoring model to assess a company's creditworthiness and includes information on payment history, credit utilization, and other financial factors.

Improving and Accessing Your Business Credit Report

Improving your business credit score involves several strategic actions:

• Timely Payments: Ensuring bills are paid on time improves your payment history.
• Credit Utilization Management: Keeping your credit utilization ratio below 30% is seen as responsible management.
• Regular Monitoring: Regular checks can catch errors or areas needing improvement.

To access your business credit report, you can approach major credit bureaus like Dun & Bradstreet, Equifax Business, and Experian Business. Each bureau may charge a fee but provides comprehensive insights into your business's financial standing.

Potential Drawbacks

While business credit reports are invaluable, they are not without flaws. Errors can occur, from misreported payments to outdated information, which can negatively impact your credit score. Regular monitoring and contesting inaccuracies are necessary to maintain an accurate report.

Bottom Line

We hope that after reading this article, you are empowered to check out your own business’s credit report. You learned the details of what’s included in the credit report, how the score and report is compiled and calculated, why they’re important, how to improve your business credit, and how to access your business credit report. No matter if your business is in good or bad health in regards to credit, it’s always a win if you access your credit report and begin to make the changes to improve.

Frequently Asked Questions

What is a business credit report?

A business credit report is a detailed document that provides information about a business's credit history, including payment history, credit utilization, outstanding balances, and public records related to financial behavior.

Why is a business credit report important?

A business credit report is crucial for securing financing, establishing terms with suppliers, and managing credit risks. It influences loan terms, insurance premiums, and business opportunities.

How can I access my business credit report?

You can request your business credit report from major credit bureaus such as Dun & Bradstreet, Equifax Business, and Experian Business. These reports are typically available for a fee.

What factors affect my business credit score?

Key factors include your payment history, the amount of credit you use compared to what is available, the length of your credit history, public records (like bankruptcies and liens), and the overall financial health of your business.

About The Author

Bryan Huynh

Product Tester & Writer

Bryan Huynh, a committed Product Tester and Writer, ensures that you are well-informed, guiding you in discovering and comparing top-rated financial services, including personal loans, business loans, credit repair, and tax relief.

Articles by Bryan Huynh

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