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When it comes to building up credit for your small business, it’s important to understand what information is collected and how scores are assigned by the (many) business credit bureaus.
But which ones matter? It depends on a number of factors, like the industry you work in and who’s interested in your creditworthiness. The three major business credit bureaus are:
- Dun & Bradstreet credit reports and scores
- Equifax business credit reports and scores
- Experian business credit reports and scores
These commercial credit reporting bureaus collect information reflecting your company’s financial health and history — things like how much debt you owe and whether you’ve made payments on time.
The collected information is compiled and may be used to assign your company various types of scores, such as a business credit score or a delinquency score predicting how likely it is that your business will pay its debts (or not). Lenders and others considering doing business with you look at these scores for clues about your company’s financial stability, and to assess the risk that your business won’t fulfill its obligations.
Read on to find out more about the major business credit bureaus as well as some of the other reporting agencies that may be scoring your business.
Dun & Bradstreet maintains a database containing hundreds of millions of business records. Data on credit extended and businesses’ payment histories is collected from suppliers and creditors. D&B also collects information from other sources, such as public records and even interviews with company principals.
This information is used to assign a variety of D&B scores. The main D&B score is known as the Paydex score, which ranges from 1 to 100 and evaluates how well a company paid its bills in the prior year. Higher scores mean better payment history.
But there are other D&B scores to be aware of, like the Financial Stress Score or the Delinquency Predictor Score.
D&B also offers a risk assessment evaluating a company’s risk indicators, like:
- Overall risk level given payment behavior
- Trade payments
- Business size and age
- A company’s financials
In order for D&B to collect this data and score your business, you’ll need to request a D-U-N-S Number. Lenders and other companies you’re interested in doing business with who want a D&B evaluation of your company can reference this number to check your business’s credit.
Equifax collects information similar to D&B’s, including:
- Financial data
- Public records information
- Details from creditors on payment history
It uses this data to assign different scores, like a business credit risk score, which ranges from 101 to 992. It predicts the likelihood a business will become 90 or more days delinquent over the upcoming 12 months. Equifax also generates a business failure score, which ranges from 1,000 to 1,610 and predicts the likelihood of a business going bankrupt within the next 12 months. A lower score indicates higher risk.
In addition to a business credit report, Equifax provides business identity reports that confirm a company exists, and that verify key business details, like:
- A company’s tax ID
- Number of employees
- Annual sales volume
You can’t request a report from Equifax on your company. Equifax decides on its own when to start a report.
Experian maintains a database of more than 27 million businesses. Reports on companies within the database draw on data like the company’s collection and payment history, bankruptcy filings and information about banking, insurance and leases.
Based on the information in this database, Experian assigns a business credit score using the Intelliscore Plus model. Scores range from 0 to 100, with higher scores representing a lower (better) risk.
Experian won’t prepare a report and generate a business credit score unless it has a certain minimum amount of information on a business. This includes at least one tradeline, or credit account. You can begin to establish business credit by developing a relationship with a company that reports to Experian.
Other reporting agencies to know
Other companies that may collect data on your business — and assign you scores — include:
- Accurint by LexisNexis: LexisNexis assigns a Small Business Risk Score and creates credit check results for companies without established lines of credit.
- Ansonia: Ansonia maintains a database with information on companies of all sizes. It advertises “customized reports” that are simple to read.
- Cortera: Cortera offers business credit reports and will alert you to changes in your customers business behavior.
- net: Credit.net provides credit information on 15.5 million businesses across the U.S. and Canada.
- Creditsafe: Data available on Creditsafe business credit reports include legal filings, payment behavior and media coverage on the company.
- FICO Small Business Scoring Service: FICO is focused on providing business credit scores. Data is collected from consumer and commercial sources.
- Global Credit Services: Reports are available on more than 20 million public and private companies. Global Credit Services uses industry-specific scoring models and provides data including business news, public records, financial statements, SEC filings and stock prices.
- Lumbermen: Lumbermen is focused on construction and mercantile commercial credit reporting. Reports are available for companies throughout North America.
- PayNet: PayNet is focused on providing credit ratings and information about small businesses. It provides real-time data collected from a proprietary database of 24 million business lines of credit, loans and leases. It also forecasts the risk of default.
- Seafax: Seafax provides comprehensive credit reports including international data. It focuses on business information within the food industry.
- Tarnell: Tarnell is focused on reporting within the plastics industry. It provides business insight for material and equipment suppliers.
You likely don’t need to know the specific details of each of these scoring agencies. Start with the major commercial reporting bureaus if you’re new to business credit.
Building credit history for a small business can be complicated, in part because there are so many business credit bureaus that collect different data. But if your company understands how the three major commercial reporting agencies get information and assign scores, you can start working on establishing the credit required to get financing with favorable terms — so you can access it when you need it.