Business Credit Report
Your Ultimate Guide
BUSINESS CREDIT SCORE: AN OVERVIEW
A business credit score is a measurement of how creditworthy your business is. Funders and creditors use your credit score to evaluate your eligibility for financing. Business credit scores typically range from 0-100 (the higher the number, the better). The score varies based on the different evaluation methods of the three major business credit reporting agencies: Dun & Bradstreet, Equifax, and Experian.
As a small business owner, you’re more than likely aware of the importance of personal financial management. You know that maintaining a strong personal credit score is critical to your ability to qualify for a home mortgage, personal or car funding, or even a personal credit card. This being said, however, what many business owners don’t know, is that the same system of credit monitoring and reporting also exists for business owners.
In fact, just like the effect of your personal credit score on your finances—if you’re a business owner, establishing business credit is essential—contributing to your ability to get a lease, an insurance policy, and perhaps most importantly, business funding. With this in mind then, you might be wondering: What exactly is a business credit score? How does it work? And of course, how do you check your score?
In this ultimate guide to business credit scores and business credit reports, we’ll answer all of these questions—and more. We’ll explain the ins and outs of a business credit score, how it differs from a personal credit score, and how it’s calculated. Plus, we’ll discuss how you can build your business credit, as well as break down how to check your credit score with a variety of free business credit reports.
WHAT IS A BUSINESS CREDIT SCORE?
Let’s start with the basics: What is a business credit score?
Essentially, just as your personal credit score serves as a numerical evaluation of how creditworthy you are as an individual, your business credit score is a numerical measurement of how creditworthy you and your business are. Therefore, in the same way, that your personal credit score provides a way for creditors and funders to determine whether or not to approve your home mortgage, credit card, or another form of personal financing, your score is used by funders to evaluate you when you apply for a lease, insurance policy, or any type of business financing.
However, it’s important to note that although these two types of credit are inevitably related, your business credit and personal credit are completely different. Whereas your personal credit score, and thus your personal credit score, is tied directly to your social security number, your business credit, and thus business credit score, is tied to your EIN, or employer identification number.
Additionally, and as we’ll discuss in greater detail below, the two are scaled differently. Whereas your personal score ranges in number from 300-850, your business credit score typically ranges from 1-100. Like a personal credit score, however, a higher score denotes better creditworthiness.
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WHY YOUR BUSINESS CREDIT SCORE IS IMPORTANT
Before we get into the specifics regarding how your business credit score works and how it’s calculated, let’s answer a question you may be asking: Is a business credit score necessary? If you’re a small business owner just starting out, you may be wondering if you even need a business credit score, and to a larger extent, why a credit score is important.
At the end of the day, a business credit score is necessary. In fact, in the same way your personal credit score is the key to your personal finances, your score is the key to your business finances, and therefore, plays a large role in the growth and success of your operations.
This being said, although your personal finances may factor into your business’s financial processes, your business credit score will ultimately be one of the deciding factors that contribute to your ability to secure a lease, insurance policy, or financing—as your business credit score illustrates your business’s trustworthiness with business finances. Therefore, a business credit score is not only necessary, but it’s extremely important. Plus, a goodcredit score will help you get approved for financing as well as protect your personal credit.
Ultimately, the better your business credit score, the more financial options (and the best, most competitive options) you have available to you. To explain, if your business credit score shows that your business has a good payment history and is creditworthy, business funders will feel more comfortable approving small business funding or other financing to you. Along these lines, funders will also be more likely to offer the most desirable products and rates if your score is high, since your score indicates you’ll be able to pay back what you borrow.
Additionally, on top of securing financing, a strong business credit score can help you get favorable payment terms from any of your business’s suppliers—by showing you reliably pay your bills, you might be able to convince your suppliers to offer more comfortable terms.
All of this being said, even if you’re not looking for business financing now, you may be in the future, and therefore, you’ll want to build up your business credit score from the start of your business’s history. Although it is possible to secure a funding or other credit product without a business credit score, or with poor credit, it’s much more difficult and limits your options significantly.
HOW IS YOUR BUSINESS CREDIT SCORE CALCULATED?
Now that we have a better sense of what exactly a business credit score is and why it’s important, let’s discuss how business credit works and how your business credit score is calculated. As we mentioned, business credit is tied directly to your EIN, and, similar to the way personal credit is based on your personal financial history, your business credit is based on how you manage your business’s finances.
After you start running your business, you will develop business credit based on financial activities like: how consistently you pay invoices on time, how you manage your cash flow, how you maintain your business bank account, and of course, how you manage credit products such as business lines of credit, credit cards, or funding. In essence, all of your business’s financial activities and history factors into your business credit history, and therefore, affects what your business credit score looks like.
Though the method for calculating and reporting a personal credit score is relatively standard, there is much greater variation in calculating business credit scores. As we mentioned, generally, your business credit score will fall in a range of 1-100, but the factors used to reach this numerical evaluation will largely depend on the credit bureau.
DUN & BRADSTREET
Dun & Bradstreet (D&B) use a Paydex score that ranges from 1 to 100—the higher the number, the better shape your business’s credit is in. To calculate your business credit score, D&B looks at one specific factor: how timely you are when paying vendors like business funding funders, suppliers of raw materials, utility companies, insurance companies, leasing companies, and more. For this reason, paying your debts early, or encouraging your vendors to report a good history of payment can be extremely helpful in raising your credit score.
This being said, you can break down the D&B Paydex score into three tiers: scores between 80-100, scores between 50-79, and scores 49 and below. The highest range indicates a low risk of payments, with a score close to 100 meaning payments often come promptly or sooner than 30 days within terms. On the other hand, a score of 1-19 indicates that the business often takes more than 120 days to make payments.
Experian calculates your business credit score a bit differently than D&B does. This credit bureau collects information on your credit obligation from funders and suppliers, any legal filings for your business, and background information about your business. Then, an algorithm determines your business risk based on credit, public records, and demographic information.
The Experian credit report is called the “Intelliscore Plus” and is also based on a score from 1-100. Additionally, an Experian business credit score includes a risk classification from 1-5, with 1 being the least risky. A risk class of 3 is a “medium” or average risk, and 5 correlates with an overall business credit score of 1-10—meaning a high risk for payment delinquency.
Equifax uses its own method for calculating your business credit score as well, although Experian and Equifax use similar methods. Equifax collects information about your business— like payment history, credit data, and more—and then evaluates all of this data. In their evaluation, Equifax looks at the payment trends, the business credit history, the public record, and the demographics. Unlike D&B and Experian, however, an Equifax business credit report will give you three scores—a payment index score, a credit risk score, and a failure risk score.
The payment index score will be your typical business credit score, with a number ranging from 1-100. The credit risk score will range from 101 to 992, with a higher score indicating lower risk. Finally, the failure risk score will be a number within the range of 1,000-1,1610, with a lower score indicating a higher risk of your business shutting down within the next 12 months.
5 FACTORS THAT IMPACT YOUR BUSINESS CREDIT SCORE
Despite the lack of consistency between the various business credit reporting agencies, you can generally expect that regardless of the agency involved, your business credit score will be impacted, at least to some extent, by these five factors:
1. TIME IN BUSINESS
When your business is brand-new, your business credit score will be lower simply due to a lackof credit. This will matter less after your business reaches two years of operations, which is when banks become more willing to fund business funding.
2. PAYMENT HISTORY
Your consistency in paying bills on time, every time, is the single most important factor that will impact your business credit score. Even a single late payment can weigh heavily on your future access to capital, so you’ll want to be sure to set up a system to maintain payments from the beginning of your business.
3. “CREDIT MIX”
As we briefly mentioned, you can build credit in a variety of ways, such as using a business credit card, taking out funding, or establishing trade lines. This being said, future funders want to know that you can appropriately manage your finances in any borrowing situation. Therefore, your “credit mix” will influence your business credit score—by taking out multiple forms of credit and managing them appropriately, you’ll be able to maximize your credit score in this category.
4. CREDIT UTILIZATION RATIO
Reporting agencies want to see that you’re using the business credit you have responsibly, which means making payments regularly and not over-relying on the credit you’ve been extended. In evaluating your business credit score, then, credit bureaus will calculate your credit utilization ratio—for best results, you’ll want to keep your credit utilization at around 25% of the total amount you’ve been extended.
5. MISTAKES ON YOUR BUSINESS CREDIT REPORT
Unfortunately, the business credit reporting process is not perfect and errors in reporting happen more often than you might think. This being said, debt or credit defaulting can be misattributed to your business credit report, which will severely lower your business credit score. To avoid these issues, you’ll want to monitor your credit reports regularly and request corrections promptly and in writing for any mistakes you might find.
On top of these five factors, some additional elements that you might find contribute to your business credit score are company size, industry type (i.e., risk factors in your industry), length of credit history, and public records that include bankruptcies and judgments.
HOW TO CHECK YOUR BUSINESS CREDIT SCORE
So, with all of this information in mind, you may now be wondering how to check your business credit score. After all, having as much knowledge as possible on hand about your business’s past and predicted future is imperative to staying ahead of the game.
Therefore, although it’s possible to opecost of working capital without knowing your business’s credit score, it will be advantageous for you to learn how to check it. Once you do, we recommend that you check it relatively regularly. As we just mentioned, this is particularly important because sometimes credit scores are based on inaccucost of working capital data—you can only change what’s being reported to create a better reputation for your company by reviewing what’s on file.
Essentially, there are two main ways you can check your business credit score. Since business credit scores are mainly based on public information, they are available to anyone willing to pay for them—competitors, for example, can check your and other businesses’ credit scores. This is unlike personal credit records, which only you can obtain about yourself.
This being said, you can check your business credit score by either:
- Applying and paying for your business credit report from one of the main credit agencies
- Using an alternative credit service to access a free business credit report
Unfortunately, whereas the Fair Credit Reporting Act allows consumers free access to personal credit reports every 12 months, the same is not true for business owners. Therefore, to get complete, accost of working capital picture of your business credit score, you’ll likely need to pay some sort of fee.
Nevertheless, let’s break down how to check your business credit score in each of these ways:
GETTING A BUSINESS CREDIT REPORT FROM A CREDIT BUREAU
As we mentioned, since business credit scores don’t stick to a single industry standard, your score will vary depending on the credit bureau. This being said, however, each of the three big credit agencies—Dun & Bradstreet, Experian, and Equifax—each offers a way for you to get your business credit report.
DUN & BRADSTREET
With Dun & Bradstreet, you can go to their website and pay $61.99 for a business credit report—which includes a credit summary and credit risk score, a Paydex score, a financial stress score, and industry payment benchmarks. If you’re going to check your business credit score with D&B (and in general), you should also register for a DUNS number, which lists you in the company database and sets up a credit file.
It’s free to apply for the nine-digit number and once you’ve done so, you can choose to sign up for any of D&B’s other credit monitoring and reporting products. These, however, will require monthly subscriptions.
Experian allows you to purchase your business credit report on their website, charging $39.95 for the most basic report. In addition to your business credit score, this report will also include your financial stability risk rating, payment summary, collection summary, and other core information regarding your business’s finances. Experian also offers an advanced credit report option, a credit report subscription plan, as well as a credit monitoring subscription plan.
On their website, Equifax charges $99.99 for access to a single business credit report. This report will include your company profile, credit summary, public records, and risk scores. Experian also offers a business credit report multi-pack of five reports for the price of four, totaling $399.95. Additionally, like Dun & Bradstreet and Experian, Equifax also offers subscription plans for business risk and credit monitoring services.
When purchasing your business credit report from any of these bureaus, it’s important to remember—as we’ve mentioned—that they each have their own method for evaluating your business credit score, and therefore, your score will vary between reports. Moreover, as we’ve discussed, it’s also important to thoroughly review the data anytime you receive your business credit report. You’ll want to be sure everything is accucost of working capital and request corrections if you find any errors.
GETTING A FREE BUSINESS CREDIT REPORT
If you don’t want to pay a hefty fee to check your business credit score, you have a few alternative options. Here are five places where you can get a free business credit report:
CreditSignal is a free business credit reporting service offered by Dun & Bradstreet—and for a while, it was the only place to get a free business credit report. If you’ve had bad credit in the past, this is a great tool to try out.
CreditSignal allows you to stay on top of your business credit and alerts you when anything changes with your score. Once you sign up, you’ll have access to an online dashboard and mobile app to monitor what’s going on with your business credit report. You can also choose to receive email alerts whenever anything changes with your score.
This being said, CreditSignal is not only one of the best (and easiest) places to find a free business credit report, it’s a great place to look for additional business credit resources. They offer a business credit education online center to learn about credit information specific to your industry or to receive advice on how to improve your business credit score based on your profile.
One thing to note, however, is that CreditSignal gives you an indication only when your D&B business credit score and rating has changed, or when someone else has requested to see your business credit score. To view your actual score and rating—and learn who’s looking into your credit score profile—you’d need to purchase a subscription with Dun & Bradstreet.
Nav is a credit monitoring service that gives both consumers and business owners access to their personal and business credit history.
Nav is another great place to look for a free business credit report—you don’t need a credit card to sign up. In fact, Nav will give you free access to a summary of your business credit reports from both Experian and Dun & Bradstreet.
In addition, Nav will provide self-service tools —like an easy error disputing tool and a goal-setting tool (paying down your business credit card, for example)—to help improve your business credit score.
One benefit of using Nav is that they provide you with summaries of both your Dun & Bradstreet and Experian reports. CreditSignal, on the other hand, just works with your Dun & Bradstreet score. Both the business and personal credit reporting bureaus have slightly different ways of measuring your business credit rating and giving you a score, so you might get a more comprehensive picture of where you stand if you choose to work with Nav.
However, Nav provides free summaries of your business credit report. You’ll have to pay for their Premium subscription plan to get more out of your Nav account. This being said, though, if you aren’t tracking your business credit history at all—or have had bad credit in the past— receiving free business credit report summaries is a good way to start.
Credit.net isn’t technically a place to get ongoing, free business credit reports—their service will eventually cost you money.
However, if you sign up—without a credit card—you’ll get a free seven-day trial of their reporting services during which time you can pull your report and then you’ll have 30 days to view it. Although you’ll eventually have to pay for this service, having access to seven free business credit reports could be valuable. Plus, with no credit card required to start the trial, you won’t have to worry about missing your cancellation deadline and accidentally subscribing to a service you’re not interested in paying for long-term.
If you do decide to pay for their services, Credit.net offers a few different packages, all of which let you monitor your business credit report online and get access to a dedicated Credit.net expert.
CreditSafe.com is a similar business credit reporting service to Credit.net in that it costs money if you choose to opt for the subscription, but offers a free business credit report to get you started.
If you do choose to subscribe to CreditSafe.com’s service after you test out their free business credit report, you’ll have a lot of credit monitoring tools at your disposal. Your account will show your risk rating, days beyond terms, synced financial data, payment trends, and more.
CreditSafe.com offers three different packages—Standard, Plus, and Premier. The prices after your free business credit report will fully depend on your business’s needs, so you’ll need to consult one of their risk consultants to get a quote beyond the free report.
Scorely is another place to get a free business credit report demo, and then a paid subscription service if you’re ready to commit. Scorely is actually considered a business credit reporting bureau—they pride themselves on being a transparent credit bureau that aggregates data and boils it down to understandable reports.
This being said, Scorely is all about empowering business owners and helping them take control of their business credit rating. With their service, you’ll have access to easy-to-understand data (like your FICO score) and actionable tips to boost your business credit score.
BONUS TIP: HOW TO GET A FREE BUSINESS CREDIT REPORT
Although this tip won’t be applicable to checking your business credit score on a regular basis, in the specific case that you’ve applied for small business funding and have been denied, there’s one sliver of good news—you can request a business credit report for free after you’ve been turned away.
Once you’ve been denied for business funding, you’ll get a letter in the mail from the business credit bureau that the funder contacted when taking a look into your business credit score. You can receive a copy of your business credit report from the bureau if you send the letter back within 90 days—with a written request to access your free report.
HOW OFTEN SHOULD YOU CHECK YOUR BUSINESS CREDIT SCORE?
At this point, especially if you’re not planning to subscribe to a monthly credit report or monitoring service, you might be wondering how often you should check your business credit score. As we’ve discussed, it’s important to check your credit score regularly to ensure that all of the data is accucost of working capital and there aren’t any errors affecting your report.
This being said, a good rule of thumb is, at minimum, to check your business credit score once a year. If you can, it’s even better to check it every six months—generally, this time frame should be sufficient for keeping up to date with your business credit.
However, if you’re planning to grow your business with business funding from a bank or other funders in the immediate feature, you may decide to sign up for a credit monitoring service or access your business credit reports more regularly. After all, your business credit will play a large impact on your eligibility for financing products, and therefore, you’ll want to be all the more of where you stand before you submit a business funding application.
TIPS FOR BUILDING CREDIT AND IMPROVING YOUR BUSINESS CREDIT SCORE
So, by now you know what a business credit score is, why it’s important, how it’s calculated, and the different ways you can access your business credit report. To conclude our discussion, then, let’s break down some of the best ways you can build business credit and improve your business credit score—so that you can put your company in the best place possible for financial success.
1. SEPACOST OF WORKING CAPITAL BUSINESS AND PERSONAL FINANCES
Not only is separating your business and personal finances important for building business credit, but it’s also generally a best practice for running your business.
To sepacost of working capital your finances, then, you’ll want to open a sepacost of working capital business bank account, get a sepacost of working capital business credit card, and only use these for business purposes. Additionally, you’ll want to make sure that your business is registered appropriately and that you apply for an EIN and use that number for any bank or credit products you apply for.
Once you’ve set up your business checking account, you can apply for a business credit card that reports to business credit bureaus. By making on-time (or even early) payments regularly to vendors that report to business credit bureaus, you can start to build and maintain a good business credit score.
2. ASK SUPPLIERS TO REPORT YOUR PAYMENT HISTORY
Chances are that you’ll be working with third-party vendors at some point over the life of your business. Many of those vendors opecost of working capital on trade credit, meaning they provide a product or service for you upfront and bill you through an invoice later on.
In order for the trade credit relationships you establish to count toward increasing your credit score, you’ll want to make sure that your payment history gets passed along to business credit reporting agencies.
Therefore, when selecting any supplier with whom you will have an account payable relationship, you’ll want to ask ahead of time whether they plan to report your payment history to a business credit bureau. By doing this, you help ensure that your on-time payments to these vendors can positively impact your credit score.
3. USE A BUSINESS CREDIT CARD FOR DAY-TO-DAY EXPENSES
In addition to large-scale business expenses, the day-to-day operations of your company undoubtedly involve smaller one-off and recurring costs. Paying for those smaller expenses with a business credit card lets you manage your finances while also building your business credit.
For the best possible impact on your business credit score, you’ll want to treat your credit card spending as if it were cash. You don’t want to spend money you don’t have and you will want to pay off your business credit card bill in full each and every month.
4. SET UP AN ACCOUNTS PAYABLE SYSTEM TO AVOID LATE PAYMENTS
This cannot be overstated: Paying your business’s bills on time, every time is the single most important action you can take to maintain a strong business credit score.
Even a single late payment can have a dramatic impact on your future ability to obtain capital for your business, which is why you need a reliable accounts payable system to help you keep track of the payments you owe to vendors, funders, and anyone with whom your business has a trade relationship.
5. SIGN UP FOR BUSINESS CREDIT MONITORING SERVICES
An alternative to paying for your credit score once every year is to have your credit regularly monitored by the companies mentioned above.
Along with allowing you to address issues of identity theft before they can impact your business, using a credit monitoring service is a great way to quickly catch any mistakes that may pop up on your credit report, allowing you to make corrections before the anomalies can impact your access to capital.
Certain services will send you business alerts relating to a multitude of credit “red flags.” This lets you access your credit file at your discretion—a helpful advantage to have as you prepare your future business funding application.
6. OBTAIN A DUNS NUMBER FOR YOUR BUSINESS
As we mentioned briefly above, the Data Universal Number System (DUNS) is a worldwide numerical identification system managed by business credit reporting agency Dun & Bradstreet that established a unique nine-digit code for every registered business. Obtaining this number will help you to establish your business credit history not only through Dunn & Bradstreet, but with other reporting agencies as well. Plus, you also need a DUNS number if you ever plan to apply for an SBA funding.
You can register for your business’s DUNS number through Dun & Bradstreet’s online application portal. It only takes a few minutes to provide your company’s legal name and address, your contact information, and a few other basic pieces of information. From there, it should take about a month to receive your DUNS number via email or postal mail
7. ALLOW TIME TO BUILD YOUR BUSINESS CREDIT
Building up your business credit score can feel like a mountain of effort that seems to never pay off—but you’ll want to be patient and stay the course. It will take time for your efforts to better manage your business credit to impact your credit reports and score, but ultimately it will make a difference. Plus, as your access to low-cost working capital for your business improves, you’ll realize that putting in the work to improve your business credit was worth it.
8. DON’T FORGET ABOUT YOUR PERSONAL CREDIT
Although your personal credit score and business credit score are separate, your personal credit score will also play a role in your ability to receive credit products like small business funding.
9. MIX YOUR CREDIT AND MAINTAIN A DECENT CREDIT UTILIZATION RATIO
Finally, once you’ve got a pretty good handle on your business credit score, you can take your efforts to the next level by mixing your credit and maintaining a decent credit utilization ratio. As we mentioned earlier, both of these are factors that most often impact your score.
This being said, to mix your credit, you can open multiple different lines of credit—such as credit cards, funding or trade lines. Having a credit mix can further improve your business credit, provided you’re using each account responsibly.
Additionally, you’ll also want to maintain a decent credit utilization ratio, meaning that although you have multiple types of credit, you’re not maximizing any of your lines. You’ll want to keep your credit utilization at around 25% of the credit you have available to help your business credit score.
THE BOTTOM LINE
At the end of the day, managing your business finances—including understanding and building your business credit score—can be one of the most involved and important parts of running a business. Since your business credit score is an incredibly influential factor in your ability to get a lease, insurance, or small business funding, it’s worth investing time and conscious effort into establishing your business credit.
As we’ve discussed, your business credit score and personal credit score are different—and unfortunately, there are many more variables to consider when it comes to what your business credit score looks like and how it’s calculated. Nevertheless, by paying close attention to your finances and checking your credit score regularly, whether through a credit bureau or with a free business credit report, you can properly plan and ensure that you’re ahead of any problems or errors before they start to affect your business.