How to Improve a Business Credit Report
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You and your business have something in common: You both have a credit report. And just as your personal credit report helps lenders decide whether to approve you for a credit card or a mortgage, your business credit report helps lenders and other vendors decide whether to trust your business with a new account or business loan. So it’s crucial to keep a close eye on it and keep it in the best shape possible.
The basic rules for building a solid credit report are the same for your business as they are for you: Pay your bills on time, limit how much debt you take on and maintain a positive, lengthy relationship with creditors. Let’s take a closer look.
- How to build and improve your business credit
- What is a good business credit score?
- How to check your business credit
- Bottom line
How to build and improve your business credit
The first thing you need to do is make sure you have a business credit report. Establishing a business credit report isn’t necessarily automatic. A credit bureau will generate a report on your business only if you register your business publicly, take out a business loan, or work with a vendor that reports directly to the bureaus.
If you don’t have one already, you may be able to directly request a D-U-N-S number from Dun & Bradstreet. That will help get you on the agency’s radar and make it more likely your company’s information will be collected (and a creditor will see it).
Next, “get a business credit card as fast as you can,” said Brian Bond, vice president of marketing and small business for Experian’s Business Information Services. “Start establishing credit early, even if it’s a small business.”
Be careful not to take on too much debt, though, he warned. “People that are looking at a business credit report and making a decision are going to be looking at exposure,” he said. If you use up too much of your available credit, that can be a red flag suggesting your business is overextended.
Don’t forget about your suppliers either. A business credit report collects payment information from a variety of businesses — not just lenders. If you regularly work with a supplier that sends you invoices, rather than demands immediate payment, then that information may show up on your reports, helping demonstrate that you are a reliable payer.
Likewise, if a company gives you trade credit for a lengthy period (similar to a traditional line of credit) and reports it, then that information could show up on your report.
To ensure a strong report, pay your vendors on time and try to maintain a stable relationship. “Manage business credit as responsibly as personal credit,” said Nancy Bistritz-Balkan, vice president of consumer education at Equifax.
Also try to seek out creditors and vendors that report directly to the credit bureaus — especially if you’re just starting out. Otherwise, you may not get credit for every on-time payment.
What is a good business credit score?
Many of the credit bureaus that sell business credit reports, such as Dun & Bradstreet, Equifax and Experian, also offer business credit scores. Unlike a personal credit score, a business score typically ranges from zero to 100. (FICO offers a business credit score that ranges from zero to 300.) The metrics that go into a score will depend on the credit bureau supplying it; but in general, the higher the number, the better. For example, Bond said he pegs a good Experian business credit score as 80 or above.
In addition to your business score, a credit bureau might also assign your business other ratings, such as a financial stability rating or stress score that predicts how likely you are to stay in business.
Like credit scores, these kinds of ratings are only partially based on factors within your control. You can put your best foot forward by paying every bill on time and maintaining steady relationships. However, if your business is unproven or you’re working in a volatile industry, you could wind up with a lower rating than you’d prefer.
How to check your business credit
Unlike personal credit reports, you aren’t entitled to a free copy of your business report. Instead, you’ll likely have to buy a report from a company that offers them, such as Dun & Bradstreet, Experian, Equifax or LexisNexis. Prices vary widely and may even change depending on your business.
Checking your business credit is important because it gives you a sense of what your business’s options are and how others might view you. Regularly checking your credit can also give you an opportunity to flag misinformation or unauthorized accounts.
To access your report, visit the credit bureau’s website and search for your company’s name. You’ll then typically be given the option to purchase a single company report or multiple reports.
Some companies may offer free business credit reports; however, there could be a catch. For example, Creditsafe offers a free credit report, but it’s part of a free trial. Meanwhile, Dun & Bradstreet offers a free credit alert service called CreditSignal that pings you anytime it detects changes to your Dun & Bradstreet score.
Your company’s business report isn’t just important for obtaining credit and winning better rates.
It also tells a comprehensive story about your business’s financial health and prospects and could be a key factor in your ability to convince another company, such as a supplier, to work with you.
If you’re serious about your business, then it’s crucial to tend to your company’s credit and make sure you’re building a reputation as a solid, trustworthy business. The better your company looks on paper, the more options you’ll likely have available.