Should You Run a Business Credit Report?

Credit can make or break a business. Having the option to borrow money or get some breathing room on paying bills can be crucial in allowing a company to survive, thrive and take advantage of opportunities for growth. Without this option, operating a business can be like having one hand tied behind your back. That’s why it’s important for you to be aware of the ins and outs of business credit — and how your company is doing in this area.

What Is Business Credit?

A business credit score is similar to a personal credit score in that it reflects the financial history of a business. Your business credit score rates the quality of your business’ financial dealings, including credit, bill-paying history, debt-to-credit ratio, defaults or bankruptcies, creditworthiness and more.

Like a personal credit score, a business credit score can help or harm your business. It is an important factor in whether your business will be approved for loans — and what the terms of those loans will be if so. It can also influence the way other companies evaluate your company and affect other areas of your business, such as insurance rates.

What Is a Business Credit Report?

A business credit report contains the credit score for a business along with other evaluations and details about a business’ financial history. Business credit reports are issued by business credit reporting agencies, which use financial data, payment histories, public records and more to create credit files on businesses.

The three major credit bureaus that issue business credit reports are Dun & Bradstreet, Equifax and Experian. Any of the credit reporting agencies could be issuing credit reports about your business at any time, so you should keep tabs on your credit rating with all three main agencies.

While all these agencies issue business credit reports, they use different methodologies to determine credit scores. Unlike personal credit agencies, which are more standardized, each business reporting agency has its own type of score.

Dun & Bradstreet scores include:

  • PAYDEX Score (1 to 100), which rates a company’s ability to pay debts
  • Commercial Credit Score (101 to 670), which predicts the likelihood that a company will default on its payments over the next 12 months
  • Financial Stress Score (1,001 to 1,875), which predicts the likelihood that a business will fail over the next 12 months

Equifax scores include:

  • Business Payment Index (0 to 100), which rates a company’s ability to pay debts
  • Business Credit Risk Score (101 – 992), which assesses the risk of severe delinquency on any account over the next 12 months
  • Business Failure Score (1,000 to 1,880), which predicts the likelihood that a business will fail within the next 12 months

Experian’s Credit Ranking Intelliscore ranges from 0 to 100.

Why You Should Check Your Business Credit

Even if you’re not looking for a loan or line of credit, you should be aware of your business’ credit rating. Not everything that makes up your credit score is within your control, but doing what you can to improve your business credit rating will definitely pay off.

For one thing, you never know when you might need credit. Having a good credit score can make a big difference to your business if you need funds in a crunch. It can also help you secure better financing terms with vendors and lower insurance premiums.

Another reason to keep on top of your credit score is that other parties (such as potential business partners) can easily access credit reports about your business. You should at least know what others are learning about your business when they see those reports.

It’s also true that errors sometimes appear on business credit reports. It’s up to you to check your file to make sure everything is accurate — and get any errors corrected quickly if they do appear.

Checking out your credit report can also offer you another perspective on how your business is doing to help with evaluation and planning. Information within your business credit report can help you understand how you compare with others in your industry, as well as where your strengths and weaknesses lie in areas such as risk and cash flow. Keeping an eye on your credit file can also alert you to potential fraudulent activity.

How to Run a Business Credit Report

Unlike personal credit reports, business credit reports are public, and anyone can buy a report on any business from the credit reporting agencies mentioned above. Credit agencies offer a range of reports and services at varying prices.

Keep in mind that businesses are not entitled to a free annual credit report the way that individuals are, but you can get free business credit information in certain circumstances:

  • You’ve been denied credit — If your business has been turned down for a loan, you can get a free credit report from the credit bureau that the lender used to get the credit report on your business.
  • You want to monitor your credit — Dun & Bradstreet offers a free service called CreditSignal that can alert you whenever your business credit score changes or someone purchases a copy of your business credit report.
  • Free trials — CreditSafe.com, which offers comprehensive credit information and monitoring, has a free trial that allows you to get access to all the information it would offer paying subscribers. This includes credit scores and limits, company financials, adverse credit insights and more. You can also get a free seven-day trial of Credit.net’s business credit-risk evaluation service, which offers access to their reporting services and seven free business credit reports.

However, in order to get a complete and thorough picture of your credit, you will usually have to pay for reports. With a variety of reports and services available from credit reporting agencies, you should be able to find a way to check your credit that suits the needs of your business.

Get up to Date on Your Credit

There are plenty of reasons to keep track of your business credit information — the only real downside is cost. Business credit scores and other information contained in credit reports changes all the time, so it’s up to you to make sure you’re keeping up with the latest credit profile for your business.

Have any tips for running business credit reports? Let us know on Twitter @Revenued_com.

Jennifer Sokolowsky writes about finance, legal and tax topics for publications and companies including The Puget Sound Business Journal, Avalara, and Avvo.
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