How to Read a Business Credit Report
By Ben Luthi
As a business owner, gaining access to capital is essential for building and expanding a business. While it’s possible to get business financing from the very beginning, you’ll have a much easier time getting inexpensive capital in the long run if you establish a business credit history.
As you work to build your business credit history
, it’s important to understand how the system works, how to build credit with the major credit bureaus, how to read a business credit report and how it affects your financing options.
What is a business credit report?
At a basic level, a business credit report is similar to a personal credit report, in that it contains information about the creditworthiness of your business, and your history of business credit management. (And you should also know how to read your personal credit report
Commercial lending is already a risky business — more than one-fifth of startups don’t survive the first year and a little less than half survive five years, according to the U.S. Small Business Administration
. So for business lenders, this information makes it possible for them to determine how likely it is that the business will repay its debts.
There are a handful of business credit reporting agencies out there, but the main ones to know are Experian, Equifax and Dun & Bradstreet. You’ll find a lot of the same information with each, but it can vary from bureau to bureau in both content and structure.
All of this information can help prospective lenders find out what they need to know about your company and its creditworthiness.
How your business credit report differs from your personal credit report
While the concept of a business credit report is the same as a personal credit report, there are some significant differences between the two.
“It’s actually quite a different experience for consumers who are used to checking and monitoring their consumer credit,” says Gerri Detweiler, education director for Nav, a service that offers access to business credit scores and reports. “Checking your business credit for the first time will probably bring some surprises, with the biggest one being the data consistency.”
According to Detweiler, it’s not unusual for business lenders to only report to one of the major commercial credit bureaus, or to report only negative information or nothing at all. So it’s possible to have a business for years and work with lenders but never establish a business credit history.
And if you do, you may pull up your business credit report from one bureau, compare it with another, and find some discrepancies.
Also, gaining access to your business credit report isn’t as easy as it is with your personal credit report. As a consumer, you can get access to each of your credit reports for free once every 12 months through AnnualCreditReport.com
, and you can also get a free copy if you are denied credit due to information on your credit report or if you add a fraud alert to your credit file.
With business credit reports, however, there’s no federal or state law giving you the right to view yours for free.
“In fact, I'm not aware of any state regulations regarding business credit reports,” says Detweiler. “Whether it's disclosures, disputes or anything else. They're completely unregulated.”
How to read your business credit report
Reading your business credit report can be difficult, especially given that each one may have different information and metrics.
In general, though, here’s what you might find with each business credit report:
- Business background information
- Company financial information
- Age of the business
- Payment history
- Lawsuits, liens, bankruptcies and court judgments
You may also see some codes, which describe the type of industry your business is in. Because some industries are inherently riskier than others, this can further help lenders assess your company’s creditworthiness.
Let's take a closer look at a few of these sections. Keep in mind that each section could look a little different across business credit bureaus.
This section includes a business profile, including any parent companies, subsidiaries, location and contact information and key personnel. It also includes some basic information on the history of the business, such as the number of years in business, the number of years on file with the credit bureau and the total number of employees.
Some version of this section is included in reports at each of the business credit agencies.
Credit score and/or risk rating
Business credit score ranges vary from credit bureau to credit bureau. Generally speaking, this score indicates how high or low of a risk you pose when it comes to making payments on time. It is also used to predict how likely a business is to face severe financial distress within the next 12 months.
This summary shows information like the number of payment tradelines, business inquiries, amount of credit extended, your business credit limit, as well as information about credit utilization and credit balances. While this just presents a summary, many of the details are explained in later sections.
Just like with a personal credit score, how many new credit inquiries a company has impacts business credit too, and will appear somewhere on the report.
At Experian, the report outlines how your company’s payment trends align with payment trends across the industry, as well as a business’ recent payment activity
on a month-to-month and quarter-to-quarter basis. It could also provide specific details about each tradeline, including payment terms, credit balances and comments associated with each supplier.
Collections, judgments and liens
Debt sent to collections
is usually included on your business credit report, including the amount sent, and whether it was closed, open, collected or uncollected.
If a business has any judgments against it, they also reflect on their credit report, and include information such as the court location, plaintiff, where the judgment is in the legal process and the amount the business is liable for.
Any outstanding tax liens will also appear, including information about the filing location, tax type, liability amount and type of tax involved.
Again, it’s important to note that, while these are some general categories that are included, each credit bureau has their own version. Looking at a sample report from Experian, for example, there are 14 different sections that break down different aspects of your business credit.
These sections include:
- Company information
- Business credit score
- Financial stability risk rating
- Credit summary
- Payment trend summary
- Trade payment information
- Collection filings
- Collections summary
- Commercial banking, insurance and leasing
- Judgment filings
- Tax lien filings
- UCC filings
- UCC filings summary
The thing that keeps coming up over and over again though, no matter the credit bureau? The importance of making payments for your business on time, or before the due date, every time, as agreed.
Tradelines may not be clearly labeled
As you read through the tradelines you have with different lenders, one thing you might notice is that business reports don’t always list the names of the creditors.
“So if you have a credit card it can just say ‘bank card’ but not who the issuer is,” says Detweiler. “You have to be a little bit of a detective to try to figure out who’s reporting and who isn’t.”
If you only have a few business credit accounts open, or one business credit card for example, you may be able to easily match them up. But if you have more, you may need to do some more legwork to find out which is which based on the information, such as payment history, balances and more, listed in each tradeline.
If you see something you don’t recognize, you can dispute it directly with the business credit reporting agencies here:
How to get access to your business credit reports
None of the business credit reporting agencies offer ongoing free access to your business credit reports. If you’re looking to get a report directly from the bureaus, here’s what it will cost:
- Dun & Bradstreet: You can gain access to your report from the reporting agency plus other features for $149 per month.
- Equifax: The bureau offers access to a single credit report for $99.95, or you can pay $399.95 to be able to check your report five times.
- Experian: You’ll pay $39.95 for one-time access to your basic report and score with the agency, or you can pay $179 per year for ongoing access.
You may, however, be able to access certain aspects of your reports, such as scores and summaries, from services like Nav, CreditSignal (which is offered by Dun & Bradstreet), Credit.net and Creditsafe. Nav and CreditSignal offer free services, while the other two charge for ongoing use.
How to establish a good business credit history
Unlike personal credit reports, your business credit report doesn’t use your Social Security number to identify you. Instead, it uses an employer identification number, also called an EIN, which you can apply for with the IRS
. If you don’t have one already, get one to get started.
How your business credit report looks and what constitutes good business credit, however, can vary by credit reporting agency. Here’s a quick look at each.
- Dun & Bradstreet: The agency provides the PAYDEX score, which ranges from 0 to 100. A score of 80 or above indicates that your business has a good credit history, while a score of 49 and below signifies poor credit. To get a PAYDEX score, you’ll need to request a D-U-N-S number.
- Equifax: The bureau offers three different scores: a payment index, business credit risk score and a business failure score. The payment index, which is the most basic, ranges from 0 to 100 and is based on your business’ payment history over the last 12 months. A 90 or higher means that you’ve paid as agreed, an 80-89 means that you’ve been 1-30 days past due, and so on.
- Experian: This agency provides the Intelliscore Plus, which predicts the likelihood that you’ll become seriously delinquent in the next 12 months. On a scale of 0 to 100, a score of 76 or higher means that your business is a low risk, and a score of 25 or below means that your business is a high risk.
As you start taking on credit for your business, make sure to ask each lender to find out what their reporting practices are. If they don’t report all of your payment activity or only provide information to one of the major agencies, it may be better to find another lender.
Don’t ignore mistakes or errors on your report
Over time, continue using credit responsibly and pay your bills on time. As with your personal credit, late payments will damage your credit score
. Also, consider checking your business credit reports and scores from time to time to make sure there’s nothing amiss.
If you’ve been paying on time, for example, and notice your score dip significantly, it’s possible that your report is showing incorrect information. Checking your business credit report won’t affect your score, so do it as often as you feel is best.
If you’ve made some mistakes as a business owner and your business credit history has some negative marks, take some time to address them. For example, the longer a payment is delinquent, the more negative the impact on your credit score, so get caught up on payments as quickly as possible and stay current going forward.
Keep in mind, though, that with some things, you may just need to wait until they fall off your report. Again, how long something remains on your credit report can vary from bureau to bureau, so check with each to get more information.
As an example, though, here’s how long
items will remain on your Experian business credit report:
- Trade data: 36 months
- Bankruptcies: Nine years and nine months
- Judgments: Six years and nine months
- Tax liens: Six years and nine months
- Uniform Commercial Code filings: Five years
- Collections: Six years and nine months
- Bank, government and leasing data: 36 months
Don’t forget about your personal credit
While it’s essential to understand how your business credit reports work, it’d be a mistake not to improve your personal credit
as a business owner.
According to the 2019 Federal Reserve Small Business Credit Survey
, 86% of small businesses with at least one employee rely on both their personal and business credit scores to get access to capital. And with 45% of all such businesses, there’s no dependence on a business credit score
Managing all of this can be daunting, especially if you’re a new business owner. However, properly managing your business credit reports can make it easier to get the funding you need to run your business.
Above all else, make it a goal to make your debt payments on time and use free tools like Nav and CreditSignal to get a basic idea of where your business credit stands. And if you’re looking to borrow money for your business
, that might be the best time to check your business credit reports and make sure everything is in good shape.
About the author
Ben Luthi is a personal finance writer who has written for NerdWallet, Student Loan Hero, US News and World Report, as well as other major media outlets. He holds a bachelor’s degree in finance from Brigham Young University.