Understanding Your Business Credit Report

A business credit report helps lenders evaluate the risk of loaning money to a potential business. The report contains a score that indicates how likely a business is to repay its debts. A lot of different factors go into determining that number.


What does the information on that report mean? That depends upon who provided the number. There are four bureaus that collect data for these reports – Dun and Bradstreet, Experian, Equifax and FICO. Unlike personal credit scores, businesses must pay to receive their information.


Once a company purchases its business credit report, it will receive a score. The higher the number, the more creditworthy the business. The older a business is, the more often it will receive a higher score. One reason behind this is that more established businesses frequently have more mature networks, which can help ease temporary financial setbacks.


While on-time payments to vendors and contractors are a strong indicator a business will be able to repay a loan, those on-time payments alone often aren’t enough to guarantee a perfect score. Many reporting bureaus reserve the highest scores for businesses that pay bills 30 days ahead of what a company’s contract terms require.


The bureaus examine data from a business and look at whether or not there is a high risk of delinquency, a history of financial stress and a pattern of late or missed payments to vendors. Some bureaus look back as far as two years when making a determination.


The report number an owner sees is not set in stone. Similar to personal credit reports, a company may dispute or challenge incorrect information contained within a business credit report.


Other factors that influence the credit of a business include the age of business accounts, the available credit on company cards and the amount of credit used in the past three months. Not having enough credit available or using too much of a credit limit can negatively impact a business. Opening many new credit accounts and using most of the limit available can signal to lenders that the company is struggling. Even legal filings against a company can push down its overall credit score.


Having good business credit can help an owner receive more favorable loan terms. Most small and medium-sized businesses that pay their bills on time and have no bankruptcies should expect to be assigned a number in the medium to medium-low range. Older businesses are more likely to have a risk rating that is low. Businesses with multiple bankruptcies or multiple late or charged-off payments should expect to receive a high risk rating.

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