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What is a business credit report and why does it matter?

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Nearly everyone is aware of their personal credit report. There are ads for free credit reporting services, commercials pointing out the importance of having a solid credit history, and so on. But, what about your business credit report?

Every startup, small business, and even enterprise needs to be on top of their business credit history. This is for a number of reasons, going well beyond getting a business credit card. Business credit bureaus use your business credit score for a number of purposes, any of which can mean the difference between securing a necessary loan or even a credit card. 

Let's take a look at what your business credit report entails and how you can go about boosting your business credit score.

What is a business credit report?

Your personal credit report is essentially the culmination of your financial habits. All your loans, mortgage payments, overdue bills, utility payments, and so on come together on your credit report and give lenders an idea of how financially reliable you are. A business credit report is very much the same. It allows lenders to determine the creditworthiness of your business.

Business credit reports are created through the collection of information by numerous business credit bureaus. Many of the business credit bureaus aren't the same as the ones that create personal credit reports, which are put out by Experian, Equifax, TransUnion, FICO. Instead, there are business credit reporting agencies, compiling credit information that's specific to your business. Some of the major business credit bureaus are Dun & Bradstreet, Equifax Small Business, and Experian Business.

Much like a personal credit report, your business credit report is influenced by a few key factors that determine if you're a credit risk. These factors include:

  • How long your business has been in operation: Older businesses can have an advantage here, as they have an established payment history, have built a reputation, and essentially, have evidence to show whether they're a high or low credit risk.
  • Frequency of payments made on any debts or lines of credit: Credit bureaus look for business owners that make regular, timely payments on any lines of credit or debt.
  • Outstanding debt: Any debt that's fallen behind by numerous payments and is on the verge of being sent to debt collectors will drastically impact your business credit score.
  • Credit utilization: It's generally a good practice to limit your credit use. Many have found that any use over 30% will begin to negatively impact your credit score, so keep your credit use as low as possible.

Credit bureaus don't overtly state everything that will impact your credit score, so the above are only a handful of criteria. But the above criteria are without a doubt some of the most important ones, so take note. Next, it’s important you know how to check your credit report.

Checking your business credit report

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The first step to getting your business credit score under control is knowing where to check your business credit report. While there are numerous free options for checking your personal credit score, your business credit report will generally cost you. The price can vary depending on the bureau you decide to use. Below are several places that allow you to get your business credit report, each one reputable:

  • Experian Business Credit Report: If you want your business credit report straight from a source, go through Experian. An Experian Business Credit Report will be more accurate than third-party options and offer your actual score. But, their reports aren't free, making it less than ideal for routine checking.
  • Equifax Business: An Equifax Business Credit Report, much like the Experian report, will be accurate and give you your true score. Their reports can vary in price, but can come with additional perks like credit monitoring services.
  • Dun & Bradstreet report: Dun & Bradstreet offers free credit monitoring, which allows you to stay in the loop in the event of a credit score change. They also offer various services to help businesses build their credit and establish responsible spending habits.
  • Credit.net: Credit.net offers full business credit reporting with the added bonus of analytics and insights. These insights can be especially useful for new business owners looking to build good business credit. Credit.net isn't free but does offer three package tiers.
  • CreditSignal: CreditSignal is a free tool that's specifically designed for monitoring your Dun & Bradstreet score. The tool is available for free, making it a great option for checking your D&B score on a regular basis.
  • Creditsafe: Creditsafe doesn't offer a free credit report but does provide in-depth credit reporting that allows you to get a better picture of your company's overall spending habits. This takes into account company information on your shipping routes, late payments, and even customer and shareholder information.

There are numerous sites that can help you stay on top of your business credit profile, many of them offering their own unique services and insights. When in doubt, go with one of the big three credit reporting agencies listed at the start of this section. If you're looking for a free business credit report, beware of fraudulent sites. Don't give out your Social Security number or any sensitive information.

6 tips on boosting your business credit score

Building business credit takes time, much like building personal credit. But, there are numerous things you can do to boost your business credit score and lower your credit risk score.

1. Stay on top of your report

Your company likely makes numerous credit decisions every day: issuing company credit cards, paying suppliers, acquiring small business loans. All of these credit decisions can impact your credit score in various ways.

Stay on top of your business credit score by checking your business credit report every month or two. It's also a good idea to use a business credit monitoring service, as this will alert you to any suspicious activity and notify you of score fluctuations.

2. Create accounts with current suppliers

There's a good chance your business works with at least one supplier or vendor if not more. If you currently work with any vendors and have a great vendor relationship, talk to them about establishing tradelines. This is a line of credit with the supplier that allows you to turn your regular supplier payments into credit-building payments. Basically, you're opening a line of credit with your supplier in place of your usual payment system.

3. Make timely payments

Late payments are never good for your business credit score. Pay every bill and debt on time or early when possible. This kind of behavior shows creditors you're likely to repay loans, and not only that, but on time. Set up auto-payments when available, as this will take the item off your agenda and reduce the chance you forget to pay.

4. Borrow from lenders that report to major bureaus

In order to build strong business credit, you need to be borrowing from lenders that report to the major credit bureaus listed earlier. Not all lenders or creditors report to Equifax, Experian, TransUnion, or Dun & Bradstreet.

When shopping around for a loan or credit card, ask if the company reports to any or all of the major bureaus beforehand. Otherwise these payments won't be doing your credit score the same amount of good.

5. Report any fraud

Fraudulent activity isn't unheard of with business credit. In 2018, credit card fraud had a worldwide cost of more than $24 billion dollars. A business credit monitoring service will alert you to any new lines of credit or accounts opened with your company's information. This will help you detect fraud early on, at which point you can file a complaint with your creditor and begin repairing the damage.

It's also a good idea to stay on top of your business credit card spending. Regularly check bank statements to ensure the numbers add up. If you've issued numerous credit cards to employees, be sure to set a limit to avoid excessive spending.

6. Keep credit use low

Stay well under your credit limit, keeping your utilization below 30% if possible. Healthy utilization of credit shows lenders and creditors your company can handle the responsibility of credit without overspending. This also makes it especially important that you set spending limits on any issued company cards.

Your business credit score will take time to build, but if you follow the above tips you'll be on your way to having a great business credit score.

Set up for the perfect business credit report

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Your business credit report will help you stay abreast of your company's credit health. But, the bottom line is that your credit score ultimately depends on you and your company making responsible credit choices. Always work toward improving your business credit score and make sure your employees are aware of their credit use. Eventually, your business credit report will come back with a proverbial A+, opening the door to lower interest rates and better loans for your company.

The process of building a great business score is a hill all small business owners must climb, but it's a challenge we're confident you'll soon conquer.

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