Understanding small-business credit reporting

By Randy B. Hecht and Elaine Pofeldt

Understanding small-business credit reporting
Understanding small-business credit reporting

Monitoring small-business credit isn't as cheap or straightforward as checking your personal credit record. But it's an important step in establishing your business's reputation and making sure you're not a victim of fraud.

Your company's credit reports directly affect your ability to compete and grow. Unlike a personal credit report, anyone can pull your business credit report -- they don't need your permission. "You want to make sure you have good business credit because it's one of the primary ways businesses decide whether to do business with you," says Amber Colley, director of sales partnerships for Dun & Bradstreet Credibility Corp. "They are making critical decisions to determine whether to sell to you, lend money to you, and to determine whether you're a viable partner."

"We do pull a business credit report, there's no doubt about it," agrees David Goldin, president and CEO of AmeriMerchant, a New York City firm that provides merchant cash advances, business loans and inventory purchase programs. "It's one piece of the puzzle."

Your business credit record may influence not only a company's decision about whether to do business with you, but also the terms of any deals they offer. "Interest rates can be determined on the content of your business credit report, insurance premiums can be determined on this data, as well as terms and pricing with your suppliers," says Colley.

Which reports to check
Of course, if your business and personal finances are intertwined -- as they often are for small-business owners -- you must monitor both your business and consumer credit reports to get the full picture of your company's credit ratings. You can snap the consumer piece of the puzzle into place easily by going to for copies of your personal credit reports from the big three bureaus, Experian, TransUnion and Equifax.

For the business component, the bureaus are a little different. TransUnion offers business credit monitoring in Canada and South Africa, but not in the U.S., so it isn't keeping tabs on your company's credit.

You want to make sure you have good business credit because it's one of the primary ways businesses decide whether to do business with you.

-- Amber Colley
Dun & Bradstreet Credibility Corp.

Experian and Equifax do produce business credit reports, and no matter how small your company, it's likely to be monitored if you're doing business with any company that routinely reports to those bureaus. In fact, sole proprietors comprise "a large population of our database," says Brian Ward, Experian's senior director of business information services.

Unless your small business is operating on an all-cash basis, it probably has a credit report with Experian. "Once a business pays its first bill, it begins to build its own credit history," says Ward.

Dun & Bradstreet reports are also important to keep an eye on. "If you're going to a supplier for credit, D&B is usually the de facto option," says Goldin.

While his firm does use D&B reports, it might just as easily choose Experian. "I think D&B has more recognition when it comes to business trade reports," he says.

How to check your business credit report
You can confirm that your small business is listed with Experian, Equifax or D&B by searching their websites at no cost. Note that if you operate under a DBA (doing business as) license, you may see search results returned in your legal name or the company name. In either case, if your small business comes up in the results, your company has a credit report with that bureau.

Each company offers an assortment of individual reports and ongoing credit monitoring. For example, you can access a copy of your D&B credit report for free using the Company Update feature (you'll need to first apply for a free DUNS number -- a unique nine-digit identification number for each physical location of your business); D&B's free Credit Signal product will also show if your credit score has changed (but not the actual score) and track how many times your file is being accessed. At the other end of the cost spectrum, Experian's $1,500 a year Business Credit Score Pro subscription plan allows you to access your report 30 times a month and includes your business credit score as well as a host of other features (though the company recommends its $129/year Business Credit Advantage package, which gives you unlimited access to your own report).

Once a business pays its first bill, it begins to build its own credit history.

-- Brian Ward

In keeping with consumer credit practices, Experian will also provide you with a copy of your business report at no charge if your company has been denied credit by a prospective lender.

That will help you pinpoint areas of weakness that may present your company as a higher credit risk. It will also give you the opportunity to identify and challenge any suspicious or fraudulent activity that has had a negative impact on your report, including business identity theft. "We always recommend that they're constantly monitoring their business credit report," Ward says, "and certainly, if there are adverse actions, we'll take care of those immediately."

Unlike consumer credit files, business reports cannot be frozen if the company's owner finds something amiss, but owners can dispute information by way of a fraud statement, also known as a fraud alert. "It's important to understand that a fraud alert is not a security freeze," Ward says. "A fraud alert is a message that displays on the business credit report for lenders to see so that they can take additional cautionary measures and actions on the verification of the business."

View your report through a banking lens
For bankers, on-time payment is "usually the most critical factor" in a business credit report. "Pay on time and demonstrate your ability to manage loans," says Nessa Feddis, senior vice president at the American Bankers Association. "What they're looking for is someone who has the discipline to make their payments on time as agreed."

Each bureau has different credit scores designed to assess the likelihood you'll do that. However, lower scores don't automatically mean that your business is a poor credit risk. They may flag areas in which being overly conservative about credit has backfired, and you can improve your ratings by adjusting your approach to using the credit your company already has. 

For example, you may be using your personal credit to make purchases for your company so that you keep the business credit in reserve for when it's really needed, or you may have held off on requesting an increase in your business credit limit. In those cases, simply using the business credit, paying off the balance on time and securing a higher credit limit could strengthen your company's report and reduce the risk associated with its scores.

Pay on time and demonstrate your ability to manage loans.

-- Nessa Feddis
American Bankers Association

D&B also offers a service called Credit Builder for $99 a month that allows you to provide positive payment information for your credit report that otherwise might not be there. "Let's say I've been in business two years, and I don't have any [suppliers] that automatically report to D&B, but I do pay my vendors on time," explains Colley. "The Credit Builder service allows me to contact D&B Credibility and provide vendors I do business with." D&B then contacts the vendors and verifies credit lines and payment history.

For most small businesses, however, other factors will also weigh heavily on lenders' decisions. AmeriMerchant, like many other creditors, looks at the owner's personal credit and the business's cash flow, in addition to the company's credit report, according to Goldin. 

"The bottom line is, they're looking for what is most predictive about whether this business/proprietor is going to repay the loan," says Feddis. "For small businesses, the personal assets and the proprietor's credit history are relevant, because they reveal something about that person who's going to be running the business and taking out the loan."

To strengthen your chances of getting your loan or credit applications approved, speak with your banker in advance, she says. That will give you the opportunity to learn about the process and understand what documentation you'll be required to prepare before you submit your application. 

Another strategy in support of your financing needs is to establish a relationship with a banker before you need credit. Feddis calls credit history "just a tool of the loan evaluation process" and advises that when bankers know the business and its owner, that "can only help in the decision whether to make a loan."

See related: Business loans from banks: 5 ways to boost your approval odds, 5 things you should know about business credit scores, How businesses can start on the road to credit

Published: June 10, 2015

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Updated: 10-23-2016

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