Wouldn’t it be Awesome to Start Understanding Business Credit Reports?

When most of us think of business credit reports, we probably think of a lot of numbers and painfully large and dull words. We may be wondering: where is business credit reported? And: what affects business credit score?

Not to worry. Here’s what you need to know.

Nothing Happens in Business Credit Reports Without a D-U-N-S Number

Before any of the credit bureaus can calculate your company credit score, one big thing has to happen. Your business needs a D-U-N-S number from Dun & Bradstreet. Fortunately, these are easy to get, and they are free.

You do, however, have to do the work, to file for a D-U-N-S number via Dun & Bradstreet’s website. The number doesn’t just appear without you asking for one first.

Why do you need a D-U-N-S number? It’s to distinguish your business from similar ones. For example – how often have you gone to an unfamiliar city or town and seen a business with the exact or almost exact name of one in your home town?

I’m not talking about franchises here. It’s more like, your town has a Dave’s Restaurant and the place you’re visiting has a Davey’s Restaurant.

By getting a D-U-N-S number, D & B puts your company into their enormous database.  But they also get the means of quickly and easily differentiating Dave’s from Davey’s. After all, their D-U-N-S numbers are probably not sequential (and even if they are, the database can still tell them apart).

No D-U-N-S number means no business credit score at all. And you don’t want that. So get one and, with three transactions reporting, you’ll start to have business credit reports.

The Big Credit Reporting Bureaus Can Have Different Names for Similar Things

Your business credit score from Experian, D & B (through what’s called PAYDEX), and Equifax are all going to be pretty similar.  So this is of course assuming there are no errors on the business credit reports.

For example, all three credit reporting bureaus offer a bird’s eye view at your recent payment history. Experian calls that Payment Information at a Glance. PAYDEX calls it Yearly Trend: Payment Summary.

And Equifax refers to it as Financial Account Highlights and Details for the most recent 36 months. However, the trends and activities being measured are close. Although they are not exactly the same.

The easiest way to see how the big three look at your credit is to get a hold of sample business credit reports.

• Equifax – here’s a sample report
• A business credit report from Dun and Bradstreet (PAYDEX) – a sample report plus help interpreting it
• Experian – here’s their sample report

Once the sample reports feel familiar, ask for the real thing! Get your company’s real Experian report here.  You can get your business’s real PAYDEX report here. And get your Equifax business credit report here. The business credit bureaus are here to serve you – so ask!

The Credit Reporting Bureaus Care About Just About the Same Things When It Comes to Figuring Your Score

Each of the credit reporting bureaus calculates your score based upon various weights given to a number of the following data points.

Payment History

How fast does your business pay its bills? Do you make your payments early or on time, every time? Or are there some late payments?

This is one of the biggest if not the biggest areas of concern for credit bureaus. It can be a big part of a business credit score. After all, if you do not pay on time, the rest of it is kind of a moot point, yes?

Credit Utilization Percentage

What is your company’s credit utilization percentage? This is just the credit you are using. That is, the total amount you are borrowing. Then it is divided by your total available credit. A good rule of thumb is to keep this percentage at 30% or lower.

Why do the business credit bureaus care about this? Because using too much credit often goes to how well and how fast you can pay your bills.

While it’s less important than it is for personal credit, it is still a part of a business credit score.

Legal Matters

Are there any judgments, liens (such as for taxes), or UCC filings against your company? Has your business ever declared bankruptcy? Have any of your accounts ever gone into collections?

Legal matters are public records and so the credit bureaus can and will look them up. Your company’s legal history hits your ability to pay your bills on time, yes. But it also goes directly to whether it is likely your business will survive.

Businesses teetering on the edge of bankruptcy might as well be on the edge of oblivion. And that goes into a business credit score.

Account Age

How many credit accounts does your business have open? How old are they?

Why does account age matter? One area it goes to is your history of payments. Gee, payment history is huge in a business credit score!

Why yes, yes it is. But it is more than that. Older accounts can also give a hint on the age of a business. And the older the better, when it comes to chances of business survival. This matters to credit bureaus.

Credit Inquiries

How many times has a vendor or a lender made an inquiry into your account?

Why is this so important? Credit inquiries generally mean you have been shopping around for credit. One or two is pretty normal. But more than that and it starts to raise questions. Are you desperate for credit?

And there’s an even more important question – are you using credit to pay off other credit debt?

That might not end well.

This is why it’s a part of a business credit score. And it is why the credit bureaus take an interest in it.

Company Age and Size

How long has your company been in business? How large is your organization? D & B in particular is interested in this information. Why? Because in part this goes to business survival. But it can also go to your other expenses. Lots employees doesn’t just mean payroll. It also means you probably have a human resources department.

Business age and size also helps define which other companies to compare your business to. Are you doing better than your commercial peers? Or worse? This will also factor into your business credit score.

Check out how our reliable process will help your business get the best business credit cards.

How Much Does It Cost to Search for a Business Credit Report?

With CreditSuite, nothing!

Once in D&B’s system, search Equifax and Experian’s sites for the company. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, start building business credit!

By doing so, Experian and Equifax will have activity to report on.

Monitoring Your Business Credit Reports Makes a Big Difference

Why monitor your Experian business credit report? Or your report from Dun & Bradstreet or Equifax, or even CreditSafe?

Monitoring helps you to know what is going on long before a problem snowballs.

Know what is happening with your business credit reports. Make sure all credit transactions are being reported. And address any errors as soon as you can. Get in the habit of checking business credit reports and digging into the details, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month. See: fastcs.wpengine.com/monitoring.

At D&B you can monitor at: www.dandb.com/credit-builder. At Experian, you can monitor your account at: www.smartbusinessreports.com/Landing/1217/. And at Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. Experian and Equifax cost about $19.99; D&B ranges from $49.99 to $99.99.

Update Your Information

Update the info if there are inaccuracies or the relevant information is incomplete. At D&B, you can do this at: https://iupdate.dnb.com/iUpdate/viewiUpdateHome.htm. For Experian, go here: www.experian.com/small-business/business-credit-information.jsp. And for Equifax, go here: www.equifax.com/business/small-business.

Your business credit score needs to be accurate!

Fix Your Business Credit Reports

So, what’s all this monitoring for? It’s to challenge any errors in your records. Mistakes in your credit report(s) and your business credit score can be fixed. But the CRAs generally want you to dispute in a particular way.

Get your business’s PAYDEX report at: www.dnb.com/about-us/our-data.html. Get your company’s Experian report at: www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get your Equifax business credit report at: www.equifax.com/business/credit-information.

Disputes

Disputing credit report mistakes typically means you send a paper letter with duplicates of any evidence of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always mail copies and keep the originals.

Fixing credit report mistakes also means you specifically detail any charges you challenge. Make your dispute letter as understandable as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Dispute your or your small business’s Equifax report by following the directions here: www.equifax.com/small-business-faqs/#Dispute-FAQs.

You can dispute errors on your or your small business’s Experian report by following the directions here: www.experian.com/small-business/business-credit-information.jsp.

And D&B’s PAYDEX Customer Service telephone number is here: www.dandb.com/glossary/paydex. They want you to call Customer Service as a part of your dispute.

Quick Bonus: Building Business Credit

Business credit is credit in a small business’s name. It doesn’t tie to an owner’s personal credit, not even if the owner is a sole proprietor and the only employee of the small business.

As such, a business owner’s business and personal credit scores can be very different.

The Benefits

Given that small business credit is separate from consumer, it helps to protect a small business owner’s personal assets, in case of legal action or business bankruptcy.

Also, with two distinct credit scores, a business owner can get two different cards from the same merchant. This effectively doubles purchasing power.

Another benefit is that even startup ventures can do this. Visiting a bank for a business loan can be a formula for disappointment. But building company credit, when done the right way, is a plan for success.

Individual credit scores rely on payments but also various other components like credit use percentages.

But for company credit, the scores truly merely hinge on whether a small business pays its debts in a timely manner.

Check out how our reliable process will help your business get the best business credit cards.

The Process

Building business credit is a process, and it does not happen automatically. A small business has to actively work to develop small business credit.

However, it can be done easily and quickly, and it is much speedier than developing individual credit scores.

Merchants are a big part of this process.

Doing the steps out of sequence will cause repetitive denials. No one can start at the top with company credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Business Fundability

A small business must be fundable to lenders and merchants.

For this reason, a business will need a professional-looking web site and e-mail address. And it needs to have site hosting from a merchant such as GoDaddy.

And also, company phone and fax numbers should have a listing on ListYourself.net.

Also, the business telephone number should be toll-free (800 exchange or the like).

A company will also need a bank account devoted only to it, and it has to have all of the licenses essential for operating.

Licenses

These licenses all must be in the accurate, appropriate name of the small business. And they must have the same company address and telephone numbers.

So note, that this means not just state licenses, but possibly also city licenses.

Dealing with the IRS

Visit the IRS website and obtain an EIN for the small business. They’re free. Choose a business entity such as corporation, LLC, etc.

A company can start off as a sole proprietor. But they will most likely wish to change to a type of corporation or an LLC.

This is in order to limit risk. And it will maximize tax benefits.

A business entity will matter when it comes to tax obligations and liability in the event of litigation. A sole proprietorship means the owner is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you operate a business as a sole proprietor, then at least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the small business name. As a result, you can end up being directly accountable for all company debts.

Also, per the IRS, with this arrangement there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 chance for corporations! Prevent confusion and significantly lower the odds of an IRS audit as well.

The Vendor Credit Tier

First you ought to establish trade lines that report. This is also referred to as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can start to get credit in the retail and cash credit tiers.

These types of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are typically Net 30, instead of revolving.

Hence, if you get approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, like within 30 days on a Net 30 account.

Check out how our reliable process will help your business get the best business credit cards.

Details

Net 30 accounts need to be paid in full within 30 days. 60 accounts have to be paid fully within 60 days. Unlike with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you used.

To kick off your business credit profile the proper way, you should get approval for vendor accounts that report to the business credit reporting agencies. Once that’s done, you can then use the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

The Vendor Credit Tier – It Makes Sense

Not every vendor can help like true starter credit can. These are merchants that will grant an approval with very little effort. You also need them to be reporting to one or more of the big three CRAs. So those are Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may need to apply more than one time to these vendors. So, this is to verify you are trustworthy and will pay on time.

Uline Shipping Supplies

Uline Shipping Supplies is a true starter vendor. You can find them online at www.uline.com. They offer shipping, packing, and industrial supplies, and they report to D&B.

You must have a D-U-N-S number. They will request 2 references and a bank reference. The first few orders might need to be prepaid to first get approval for Net 30 terms.

Quill

Quill is an additional true starter vendor. You can find them online at www.quill.com. They sell office, packaging, and cleaning supplies, and they report to D&B and Experian.

Because Quill reports to two separate credit reporting bureaus, you get two credit experiences with them. Place an initial order first unless the D&B score is established.

Normally they will put you on a 90-day prepayment schedule. If you order items every month for 3 months, they will frequently approve you for a Net 30 Account.

Grainger Industrial Supply

Grainger Industrial Supply is likewise a true starter vendor. You can find them online at www.grainger.com. They sell safety equipment, plumbing supplies, and more, and they report to D&B. You will need a business license, EIN, and a D-U-N-S number.

For under a $1000 credit limit they will approve virtually anybody with a business license.

Accounts That Do Not Report

Non-reporting trade accounts can also be helpful. While you do want trade accounts to report to at the very least one of the CRAs, a trade account which does not report can also be of some worth.

You can always ask non-reporting accounts for trade references. Trade references are exceptionally helpful and are some of the only subjective information on any business credit report.

Also credit accounts of any sort will help you to better even out business expenses. And this will consequently make budgeting simpler. These are providers like PayPal Credit, T-Mobile, and Best Buy.

The Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are businesses like Office Depot and Staples.

Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

One such example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or more.

The Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are companies such as BP and Conoco. Use this credit to buy fuel, and to fix, and take care of vehicles. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or more and a 411 business phone listing.

Shell might claim they want a certain amount of time in business or profits. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get an approval.

The Cash Credit Tier

So, have you been sensibly handling the credit you’ve gotten up to this point? Then progress to the cash credit tier. These are service providers such as Visa and MasterCard. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or better. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Plus, they want you to have an established company.

These are businesses such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are usually MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.

Credit Cards to Help You Build Business Credit

That’s what it’s all about, when you are business credit building. Small business credit cards offer a multitude of advantages: rich rewards and cards with limits that are typically greater than on personal credit cards.

Also, there’s an additional benefit that small business owners don’t always notice at first: a business credit card may help you build business credit.

In fact, obtaining one of these cards may help put your company on the map when it comes to building business credit, provided the card issuer reports information to commercial credit agencies.

Not all cards will have the same policy when it relates to reporting to business credit bureaus, though, and it is essential to be aware of how each one works.

Currently, American Express, Capital One, Chase, and Citi all report to Dun & Bradstreet. Chase and Citi also report to Experian and Equifax, whereas Capital One also reports to Experian. This may change in the future, so be sure to check with a provider if you are uncertain.

Small business credit cards build credit.

Tips for Building Business Credit with Credit Cards

If one of your goals is a good business credit rating, consider getting a business credit card. Many entrepreneurs believe their small business must be well-established and financially successful to qualify. But that is not necessarily the case.

Card issuers are often more concerned with the personal credit score of the business owner who applies, and will normally take into consideration income from an array of sources, not just the company itself.

A Word about Building Business Credit

Always use credit smartly! Never borrow beyond what you can pay off. Keep an eye on balances and deadlines for payments. Paying off on time and completely will do more to elevate business credit scores than pretty much anything else.

Building small business credit pays off. Excellent business credit scores help a business get loans. Your credit issuer knows the business can pay its debts. They know the business is bona fide.

The company’s EIN attaches to high scores and lending institutions won’t feel the need to request a personal guarantee.

Business credit is an asset which can help your small business in years to come. Learn more here and get started toward growing business credit.

Understanding Business Credit Reports Matters

After all, you may need to check another company’s credit report someday. Why evaluate other companies business credit reports? Because another business might want you to extend credit to them.

By getting into the habit of checking reports, you can better read and interpret reports from another business. Every bit of this skill set will help your company grow for years to come. And it all comes from a little thing – checking a business credit report. And, of course, understanding the numbers and wording in it.

Every business owner should have this skill.

Business Credit Reports 101: Key Takeaways

The credit bureaus tend to look at rather similar areas. A D-U-N-S number is vital for starting a business credit file. That and three reported transactions will give you a business credit score.

Payment history is huge in all of the business credit reporting bureaus’ reports. But credit utilization rate and account age matter. So do credit inquiries and your company’s public records in the courts. And don’t forget the basic demographics of age and size.

All of these factors go together and voila! You’ve got a business credit report.

Building business credit helps to assure your report is the best it can be. And you also want to get into the habit of monitoring your business credit. In addition, this means getting in the habit of disputing any errors. Protect your scores!

There now, that wasn’t so bad.