There are three major credit bureaus that monitor business credit. The three major business credit bureaus don’t look at the same information in the same way, so unlike your personal credit score, you don’t get the same perspective from Dunn & Bradstreet, Experian, and Equifax when they report on your business creditworthiness. Because the three major business credit bureaus look at your business from different perspectives, here’s what you need to know:
The Small Business Finance Exchange (SBFE) is made up of credit data collected by the largest small business lenders in the United States. Equifax takes that data and creates a report that reflects how small business owners make credit card and other loan payments. Because this data is a direct reflection of how small businesses interact with large business lenders, many banks use this report to evaluate your creditworthiness.
They also collect trade credit information and data from the public record to evaluate the credit worthiness of a business, but their report is heavily weighted on how a business interacts with banks and other traditional lenders like credit card providers. The Equifax database processes millions of records every day and with few exceptions is updated on a monthly basis to ensure accuracy.
Dunn & Bradstreet (D&B)
D&B is the only bureau that focuses strictly on business credit—primarily on how your business interacts with your vendors and suppliers. In fact, many potential suppliers look at your D&B reports before they offer your business credit terms; making it critically important to make sure your D&B profile is accurate.
The 100-point PAYDEX® score is probably the best know of D&B’s reports, but it’s only one of five reports they produce. They look at business-to-business data submitted by suppliers, historical payment history, public records, and industry data to create what they call a more complete business profile.
The three predictive-based scores are designed to forecast how your business will perform over the next 12 months
- The Delinquency Predictor Score: This score predicts whether or not a business is likely to pay their bills on time.
- The Financial Stress Score: This score predicts the likelihood a business will experience financial distress during the next 12 months.
- The Supplier Evaluation Risk Rating: This rating predicts whether or not a business might stop delivering goods and services.
D&B predictive scores look into the future by evaluating past performance, industry data, trade references, and the company information on your profile. It’s important to make sure you profile is correct because it’s not uncommon for something as simple as an SIC (Standard Industry Classification) code to be incorrect, which might assign your business a higher risk category—making it more difficult for you to get a small business loan.
The D&B performance-based scores represent a business’ past performance over the last 24 months.
- Your PAYDEX Score: The 100-point PAYDEX score is what most small business owners think of when they think of Dunn & Bradstreet. The higher your score the better. This score is a reflection of your payment history with vendors that report to D&B. If you have good relationships with your suppliers and keep your account balances current, but they don’t report to D&B, that information won’t be included when calculating your PADEX score. You should encourage your current vendors to report your credit history to D&B and might even consider changing vendors to those who do if your current vendors won’t.
- Your D&B Rating: This rating is based upon company financial statements and other public information to indicate a company’s net worth and financial health. If there is no other information available, D&B will rely on potentially inaccurate public data and make assumptions with information like industry size and classification, so something as simple as submitting an accurate and up-to-date financial statement has the potential to greatly improve this score.
Experian is considered by many to be the most balanced of the business credit reporting bureaus because they look at credit information supplied by both lenders and business vendors. Like Equifax and D&B, they also collect information available in the public record, as well as information from credit card companies, collection agencies, and other databases.
They look at the number of credit transactions, outstanding balances, payment habits, how much of your available credit you use, and the details of any current liens, judgments, or bankruptcies to help evaluate your credit. Your time in business and your business SIC codes along with the size of your business, is part of your Experian 100-point business credit score:
Because some small businesses don’t use a lot of trade credit, but rely heavily on the bank and others don’t access capital through the bank, but rely on terms from their vendors to do business, most lenders will look at your Experian score—because it is a good reflection of both.
Does Information Stay On My Credit Report Indefinitely?
The short answer is no. Experian is a good example. It’s pretty standard and a good rule of thumb, but the three bureaus aren’t all exactly the same:
|Trade Data:||36 months|
|Bankruptcy:||9 years, 9 months|
|Judgments:||6 years, 9 months|
|Tax Liens:||6 years, 9 months|
|UCC Filings||5 years|
|Collections:||6 years, 9 months|
|Bank, Gov, Leasing Data:||36 months|
It’s not uncommon to find mistakes on your business credit report (just like your personal credit report). And, the Fair Credit Reporting Act (FCRA) doesn’t apply to how business credit is reported, so it’s not quite as easy to fix mistakes. Fortunately, all three of the agencies want to make sure they report accurate data, so they all have a formal dispute process in place. Although it might take a little longer to get a dispute resolved than correcting a mistake on your personal credit report, the reporting agencies are all anxious to make sure legitimate issues are resolved.
The need to maintain a good personal credit score never goes away for a small business owner. That being said, a strong business credit profile in addition to a good personal credit score, will make getting a small business loan a lot easier.