When running a business, understanding your financial health is crucial. One of the best ways to gauge this is by regularly checking your business credit report. Business credit reports offer an in-depth view of your company’s financial history and creditworthiness, which can directly impact your ability to secure loans, obtain favorable terms with suppliers, and expand your operations.
In this article, we’ll break down the steps to check your business credit report, the factors that influence your credit score, and provide tips on how to improve it.
What is a Business Credit Report?
A business credit report is similar to a personal credit report but focuses on your business’s financial standing. This report is compiled by credit bureaus like Experian, Dun & Bradstreet, and Equifax. It includes information such as payment history, credit utilization, business age, public records (e.g., liens and judgments), and more. Lenders, suppliers, and potential investors use this report to evaluate your business’s risk level before extending credit or forming partnerships.
Why is it Important?
Having a strong business credit score can unlock better financial opportunities, such as lower interest rates on loans, higher credit limits, and better terms from suppliers. Additionally, monitoring your credit report can help you spot inaccuracies that may be hurting your score and address them before they lead to credit denials or unfavorable terms.
How to Check Your Business Credit Report
1. Choose a Credit Reporting Agency
Unlike personal credit reports, you are not legally entitled to a free business credit report. Therefore, you’ll need to go directly to one of the major business credit bureaus to access your report.
The three main credit bureaus for business reports are:
- Dun & Bradstreet: Known for their PAYDEX® score, which measures payment history.
- Experian: Offers the Intelliscore Plus℠, which ranges from 0 to 100, assessing business credit risk.
- Equifax: Provides a range of credit reports, including their Business Delinquency Score, which indicates the likelihood of future delinquencies.
You can request a one-time report or opt for ongoing monitoring services. For example, Experian offers reports starting at $39.95 for a one-time pull, or you can subscribe for annual access.
2. Utilize Free Monitoring Tools
Though full business credit reports aren’t usually free, there are some ways to access partial data at no cost. Platforms like Nav Prime allow you to monitor summaries of your business credit and even check for changes in your score. Additionally, Dun & Bradstreet offers a free service called CreditSignal, which alerts you when there are changes in your report, such as when your credit score is pulled.
3. Access Your Report After a Loan Denial
If your business is denied a loan or credit, you may be entitled to a free copy of the credit report used in the decision. This can be a valuable way to see what lenders are seeing without paying for it.
Understanding Your Business Credit Report
Once you’ve accessed your business credit report, it’s important to know how to read it. Here’s a breakdown of what you might find:
Business Information
This section contains details about your company, including your business name, address, industry, and any parent or subsidiary companies.
Credit Scores and Risk Ratings
Your credit score will be prominently displayed, often alongside a risk rating. For instance, the Intelliscore Plus from Experian uses a scale from 0 to 100, while Dun & Bradstreet’s PAYDEX® Score ranges from 0 to 100, with higher scores indicating better creditworthiness.
Payment History
This is one of the most critical parts of your report, showing how timely you’ve been in paying bills, loans, and other financial obligations. Timely payments will boost your score, while late or missed payments will hurt it.
Public Records
Public filings like bankruptcies, liens, or judgments will be listed here, which can significantly impact your credit score.
Factors That Influence Your Business Credit Score
1. Payment History
On-time payments are the most important factor affecting your business credit score. Paying bills on or before their due dates can help improve your score, while late payments will do the opposite.
2. Credit Utilization
This refers to how much credit your business is using compared to the total credit available. A lower utilization ratio (typically under 30%) is ideal for maintaining a strong credit score.
3. Business Age
The longer your business has been operating, the better it reflects on your credit report. Established businesses with a long history of financial responsibility tend to have better credit scores.
4. Industry Risk
Some industries are considered riskier than others, and businesses in these industries may receive lower credit scores, even if they have a strong financial history.
Tips for Improving Your Business Credit Score
- Pay Bills Early: Always strive to pay your bills early or at least on time to maintain a positive payment history.
- Monitor Your Credit Utilization: Keep your credit utilization ratio low to avoid appearing overextended.
- Correct Errors: Regularly check your business credit report for inaccuracies and report any mistakes immediately to the relevant credit bureau.
- Maintain Credit History: Avoid closing old credit accounts, as this can shorten your credit history and negatively affect your score
Frequently Asked Questions (FAQs)
1. How often should I check my business credit report?
It’s recommended to check your business credit report at least twice a year. Regular monitoring helps you catch any inaccuracies or potential issues early.
2. What is the difference between personal and business credit scores?
Personal credit scores reflect your personal financial history, while business credit scores focus solely on your company’s financial activities. They are calculated differently and use separate data.
3. Can I improve my business credit score quickly?
Improving your business credit score takes time. However, making timely payments, keeping credit utilization low, and ensuring accurate information on your credit report can gradually boost your score.
4. What happens if I find an error on my business credit report?
If you find an error, report it to the credit bureau that generated the report. They are required to investigate and correct any inaccuracies.
Conclusion
A strong business credit score is essential for securing financing, getting better terms from suppliers, and expanding your operations. Regularly checking your business credit report, understanding how it’s calculated, and taking steps to improve it can give your business the financial flexibility it needs to grow.
