Let’s say your business needs a bank loan in order to make a large purchase. Or maybe business is slow and you need to cover some of the bills. Or maybe you are working with a new supplier and need them to extend you a line of credit. How will you know whether or not you will be approved?
Well, you can either check your crystal ball or take a good look at your business credit report.
A business credit report is used by lenders, creditors, suppliers, landlords, and investors to determine the creditworthiness of a company. It affects whether a company receives business loans and for how much. It also impacts your business credit cards, financing options, and mortgage rates.
What is included in your business credit report
When you get a copy of your business credit report, here is what you will see:
● General company information and industry data
● Your business financial data
● Your business credit accounts
● Your payment history
● Your credit utilization rate
● Transactions with vendors and suppliers
● Defaulted accounts and collections
● Legal filings such as bankruptcies, tax liens, and legal judgments
How to get a copy of your business credit report
Similar to a consumer credit report, there are 3 major reporting agencies for a business credit report: (1) Experian, (2) Equifax and (3) Dun & Bradstreet.
Experian business credit reports contain basic information about a business. It includes your company’s credit score and risk factors, examines your detailed financial payment history and shows a history of your legal filings such as liens, judgments and bankruptcies.
Cost: $49.95 to $149
Equifax for business reports requires (1) key company profile information, (2) a credit summary of past and present lenders and (3) public records of legal judgements.
Cost: $99 to $399.95
Dun & Bradstreet
Dun & Bradstreet (DnB) provides the most comprehensive and detailed business credit report. Unlike Experian and Equifax who also process consumer credit reports, Dun & Bradstreet focuses entirely on business. This report includes detailed payment trends, financial statements, industry comparisons, credit limit recommendations, a delinquency predictor score, the DbB rating and much more.
Cost: $61 to $188
In addition to the 3 major agencies, there is also a “fourth” business credit reporting agency. The FICO LiquidCredit Small Business Scoring Service (FICO SBSS) which is now widely used by banks to determine your creditworthiness.
Cost: $19.95 to $39.95
How you can improve your business credit report
Since a business credit report is so vital to the financial health of your business, it is important to take steps to keep it in tip top shape. Here are 6 tips on how to improve your business credit report courtesy of the SBA. These tips may seem obvious, but when you are in the throws of day-to-day business, certain items don’t make the priority list.
1. Check your business credit report at least once a year. Learn what is on the report, know where you stand and check for errors.
2. Update your business profile. Did your business change locations? Do you have more employees? Is your business name spelled correctly? Inaccurate information about your business can negatively impact your ability to get approval for loans.
3. Pay your bills on time. This is the most obvious and most important tip that significantly affects your business credit report.
4. Keep your credit utilization under 15%. To achieve this you can (a) pay off debts, (b) take on more credit without using it, (c) ask for a larger credit limit, (d) reduce spending and/or keep credit accounts open - canceling credit accounts can lower your credit score.
5. Add positive trade experiences to your report. If you have a great payment history with certain suppliers, then manually add it to your report. (Yes, you are allowed to do this.)
6. Get rid of bad history. If you have made good on debts that went into collections, contact the debtors and request that they remove this negative information from your report.
If you would like to jumpstart your efforts, consider a small business loan from LoanMe. You can speak to one of our agents about the benefits, such as lowering your fees by consolidating and the possibility of receiving the loan in as fast as 2 hours.