I'm sure you have a habit of checking your personal credit scores, credit reports and credit card statements on a regular basis but how much attention do you pay to your small business credit report?
While there are several business credit bureaus that collect data, let's stick with the three main ones. Keep in mind that each file you have listed is going be different with each bureau so it's important that you monitor your files on a regular basis.
Dun & Bradstreet Business Credit Report
This report also known as the Business Information Report or BIR is an overall profile that suppliers and lenders will use to evaluate your company and tends to be the most popular D&B report that creditors pull. The report is pretty extensive because it includes your company's financial information, history & operations, payment history and details.
Keep in mind that the details of your company like financials are supplied by you when you set up your file so be sure to keep this information updated through eupdate so it matches the numbers you provide on credit applications. Any inconsistencies can cause your company to get declined.
Two things you should pay special attention to is the paydex score and credit limit recommendation listed in your report. A 75 or greater Dun & Bradstreet credit rating is considered a good risk but what carries more weight is the credit limit recommendation.
The conservative credit limit is for companies that prefer to minimize risk as much as possible and the aggressive limit is for creditors that will accept more risk.
Experian Business Credit Report
This report also known as the CreditScore Business Report includes you're company's business and credit information. It's considered Experian's most popular report used by creditors and specifically you want to pay attention to your business credit score.
A score of 90 or greater is excellent and it's based on your company's industry risk, number of trades, length of history and your debt to credit limit ratios. Make sure you avoid selecting a high risk SIC and NAICS classification code for your company because this can have a negative impact on your scores.
Now don't be surprised if your company is not listed with Experian because the only way to establish a small business credit report is when a supplier or lender reports your company's payment experience to them.
Equifax Business Credit Report
This report could also be referred to as the Equifax Small Business Report and it includes a summary of your company's financial and non-financial accounts. One of the unique differences in this file is the two credit rating scores known as the Equifax Credit Risk Score and the Equifax Business Failure Score.
Your risk score can range from 101 to 992 with the higher the number being the lower the risk. Some of the factors that contribute to this include derogatory trades, length of history, credit limit amounts and number of employees.
The failure risk score predicts the chances of your business failing over the next 12 months. This number ranges from 1,000 to 1,880 with the higher the number being the lower the risk of possible failure.
Some of the key factors that determine your score include length of time since the oldest account was opened, debt to credit limit ratios, negative payment history and number of trades.
This is another file that gets created only when a supplier or lender reports your company's payment data. It's said to be one of the most difficult bureaus to get listed with and this may be because many of the reporting partners are banks and lenders.
This is why I recommend establishing a reporting bank loan as soon as possible. This not only will have a positive impact on your small business credit report but it will also improve your overall bank rating.
As you can see your business credit files require the same level of attention that you give to your personal credit files. By knowing how your company's risk level is being rated by the major business credit bureaus the greater level of confidence you will have when you apply for business financing.