Business Credit Report: What It Is & How to Read It
This article is part of a larger series on Business Financing.
A business credit report is a document containing a snapshot of the financial credit health of a company. It will contain a company’s financial profile, tradeline payment history, recent credit inquiry history, and any legal filings, including judgments, collections, and bankruptcies.
The report will also include a credit score, which indicates your company’s creditworthiness and the level of risk taken by future creditors. Depending on the credit provider, there could also be other information on the report, including a financial stability score predicting future financial health.
While any of the providers listed in this article will give you a solid picture of your company’s credit health, Dun & Bradstreet is the most commonly used credit report. The company’s CreditMonitor program is available for $39 a month. Check out Dun & Bradstreet’s website for more information.
How to Read Your Business Credit Report
While each credit bureau’s report will look a little different, all of them will contain similar information. The following items should appear on any business credit report you purchase. It’s a good idea to purchase a credit report and understand it as you’re working through the process of getting a small business loan.
Business Profile
Sample credit report from Experian showing the business profile
Your business profile will likely be the first thing you see on the credit report. Information you’ll find in this section includes:
- Business legal name, address, and phone number
- Incorporation details
- Business type
- Parent and subsidiary details
- The number of employees
- Years in operation
- Standard Industrial Classification (SIC) code
- North American Industry Classification System (NAISC) code
The SIC and NAISC codes are listed because each industry has different levels of credit risk. Companies in lower-risk industries may obtain credit and insurance easier than higher-risk industries. The highest-risk SIC classifications include:
- Real estate investing
- Other types of investing
- Car sales
- Travel/transportation industry
- Money lending/collecting
- Restaurants
Tradeline Payment History
Example of Experian tradeline payment history
The tradeline payment history section shows your company’s payment history over the last three years. This section usually includes payments to vendors as well. In addition, this section includes when it was first reported to the credit bureau, payment terms, recent high credit line, maximum credit line, monthly payment, and whether it’s current or delinquent. It’ll also show how often you have been delinquent on a tradeline of 30 days late or more.
Commercial Financial History
Example of Experian’s commercial financial history section
The commercial financial history portion of the report shows your payment history with creditors, lenders, and insurers. It shows when the tradeline opened, the terms, both original and current balance, and any delinquencies in the account. Business loans, insurance policies, lines of credit, and equipment leases will show up in this section.
Legal Filings, Bankruptcies & Collections
If your business has any legal filings, bankruptcies, or collection reports that have been filed with the credit bureau, they’ll show up in this section. Tax liens, judgments, and accounts placed into collections after being delinquent for 90 days will be noted here. If you have extensive legal filings on your record, lenders will be less likely to want to extend credit to you.
Business Credit Score
Example of Experian’s business credit score section
Like a personal credit report, a business credit report will have a credit score. While each credit reporting bureau will have its own credit scoring range, all of them should provide a score that’s easy to understand. A business credit report should make it clear what level of credit risk your business is, what factors it used to come up with that score, and potentially, a forecast of the future credit risk of your company based on your report.
Your business credit score can be impacted by how much credit utilization you have, the length of time you’ve had credit, and the amount of delinquency you have on your report.
The section below will detail some of the different report providers and the range of scores each provides. It’s good to monitor your business credit score, especially if you’re preparing to get a small business loan. Having a bad credit score could force you to pay a higher interest rate on loans or could get you turned down altogether.
Business Credit Report Providers
Paragraph/Chart with Providers
Credit Reporting Agency | Cost | Credit Scores |
|---|---|---|
CreditMonitorTM program starts at $39/month | PAYDEX® score, D&B rating, delinquency score, failure score, and viability rating | |
CreditScore Report℠ for $39.95 | Credit ranking and intelliscore | |
$99.95 per report | Business credit risk score and business failure score | |
$49.99 per month (cancel anytime) | SBSS℠ score |
Dun & Bradstreet Business Credit Report
Dun & Bradstreet is the most commonly used credit report. D&B rates companies using several indices that reflect a company’s current and future credit risk. Those five scores are:
- PAYDEX® score: This score measures a company’s ability to pay debts over a two-year period. Scores range from 0 to 100, with 100 being the best.
- Delinquency score: Predicts whether a company will default on payments within one year. Scores range from 101 to 670, with 670 the least likely to default on payments.
- Failure score: Predicts the likelihood a company will go out of business within one year. Scores range from 1,000 to 1,610, with 1,610 being least likely to fail.
- D&B rating: Assesses a company’s financial strength on balance statements, company size, and business age. It includes a financial strength rating and a risk indicator score, which runs from 1 to 4, with 4 being the highest risk.
- Viability rating: Includes four indicators determining the risk of a company going bankrupt or out of business. The viability score and portfolio comparison each have 1 to 9 ratings, with 1 being the best. It also includes data depth codes and company profile codes.
As is the case with all of these providers, Dun & Bradstreet offers a variety of products that range from monthly subscriptions to one-time costs for reports. The company’s CreditMonitorTM program starts at $39 a month. You’ll need to apply for a free nine-digit Data Universal Numbering System (DUNS) number first, which can take up to 30 days to process.
Experian Business Credit Report
Experian collects business information, collection and payment history, and financial information to generate its score. Experian’s Credit Ranking Intelliscore ranges from 1 to 100, with 100 being the best score possible. The company offers a CreditScore ReportSM for $39.95. However, to get the report that includes tradeline history, you’ll need to upgrade to the ProfilePlus ReportSM for $49.95. They also offer a subscription service that starts at $189 a year.
Equifax Business Credit Report
Equifax pulls from the same public information as Experian to generate its credit report. Equifax has two different scores on its report:
- Business credit risk score: This is the likelihood of a business being over 90 days late on financial obligations. The range is from 101 to 992, with 992 being least likely.
- Business failure score: This is the risk that a business will go bankrupt in the next 12 months. Scores range from 1,000 to 1,610, with 1,610 being least likely.
Equifax reports are available on its website for as little as $99.95 per report.
FICO® SBSSSM Business Credit Score
The FICO® SBSSSM is most often used for Small Business Administration (SBA) loans. It pulls information from all three credit bureaus to create a credit score. The range on the FICO® SBSSSM credit score is between 0 and 300, with 300 being the least likely to be delinquent on loans. You can purchase the score from companies such as Nav for $49.99. This is a monthly subscription, but it’s month-to-month and can be canceled anytime.
Bottom Line
No matter which credit reporting service you choose, purchasing a business credit report will allow you to keep track of your company’s credit health. You can take care of any misreported items on the report as soon as they appear. Having a business credit report lets you know what your score is and what contributes to that score. This will allow you to make business decisions that’ll help raise your business credit score before applying for business credit.
