Credit Report Company

Business credit reports can be obtained from any of the big three credit reporting agencies: Experian, TransUnion and Equifax.  Dun and Bradstreet also provide a credit reporting service specifically for businesses.  Unlike a personal credit report, it will cost $25 for the business owner to receive a copy of the information about his or her business.

General information contained in a business credit report include the business name, both legal and “doing business as,” if applicable.  It will show corporate status, the Employer Identification Number (EIN), and who the owners and officers are.

Some of the specific information found on a business credit report includes UCC (Uniform Commercial Code) filings, which show current liens placed on business assets by creditors, open lines of credit, and equipment leases. It will also show trade credit, which provides a picture of how reliably the business pays its vendors.  Negative information like bankruptcies, tax liens, and judgments against the business will also be shown.

In addition to specific credit-related information, a business credit report will also contain an actual credit ranking, also called a credit summary.   This shows how the business ranks on a risk scale and how it compares to other businesses in that industry.  The number assigned illustrates the percentage of businesses that are considered a higher credit risk.  So, if your company gets a score of 70, it means that 70 percent of comparable businesses are considered a higher risk than yours.

Also included in the credit summary are the length of credit history, the number of active credit accounts, the number of delinquent accounts, and a ratio that compares those to the total.  Some reports will also add something called a “recommended action,” as a guideline for lenders.
Who uses business credit reports?

Although lenders would be considered the typical users of a business credit report, there are others who can benefit from the information as well.  Vendors and suppliers may wish to see how reliable your business is before signing a contract to deliver goods and services with credit terms.  Potential customers may also be interested in seeing if they are dealing with a financially healthy, reputable company.

The owner of a business can also use a credit report to assess how the company is doing, and how it measures up against the competition.  It can also let an owner estimate for how much additional credit the business is eligible.

What are the benefits of building business credit?

One of the biggest and most obvious benefits of building business credit is that lenders and others are much more willing to supply credit to a business that has a verifiable credit history.  Even if your business has always paid its bills on time, others have no way of knowing if that information has not been reported to a credit reporting agency.

Another benefit that is less well known is that as a business owner, it is wise to build a credit history separate from your individual one.  Lenders often have more stringent guidelines for business loans, and if your personal credit is weak, you may have trouble qualifying.  Building business credit gives you a second chance to establish good credit.

It is also generally advisable for business owners to keep business debt separate from their personal debt and assets.  If you borrow a large sum under your own name, using personal assets to secure it, you may find yourself losing everything if the business doesn’t perform.  

How you can build business credit

When establishing business credit, the first thing you should do is set up your business as a separate legal entity.  For most small businesses, a Sub-chapter S corporation or Limited Liability Company (LLC) will be ideal.  This effectively separates the business assets and liabilities from your personal finances.  Apply for a employer identification number (EIN) from the government.

Next, set up a business bank account under your business name and EIN.  Be sure to use the account only for business-related transactions.  Paying bills from this account will create a “credit trail” to your business.

Apply for a business credit card or small line of credit and use it for smaller purchases.  Try to pay off the balance in full every month.  This will appear as moderate and responsible use of credit on your report.

Set up accounts with vendors for smaller expenses like office supplies. If you pay them regularly and promptly, future vendors and suppliers will feel comfortable extending your business credit for larger amounts.

As you can see, business credit reporting is a useful tool, not just for credit providers, but also for the business owner.  Understanding business credit and building a strong history will help your company grow and become more profitable.

Business credit reporting is a tool used by lenders and other providers of credit to determine if a company is a good credit risk.