Understanding Small Business Credit Reports

Starting a business means having to not only building a reputation of reliability and quality but it also entails building a strong credit profile. Like personal credit reports and scores are essential for individuals, a business also must have a strong credit profile in order to secure financing, deal with vendors, and overall be trusted as a reliable, steady business entity.
Small Business Credit Reports

What Is a Business Credit Report?

Business credit reports follow the same lines as a personal credit report but there are a variety of differences between the two. The primary service for US businesses is known as Paydex and comes from the company Dunn & Bradstreet. This is the calculation model that figures out the credit score of the business based on a variety of factors. The credit report is made up of the timelines on which your business pays back its debts.

The score also differs from that of personal credit reports. The numerical range for a business credit score goes from 0-100. Scoring above 80 indicates that your business pays early for loans and other debs. The score of 771-80 means your business pays on time and is thought of as in good standing with creditors. Scoring 70 or below indicates your business is 15 days past due on payments, which is a red flag to creditors that your business may be a risky one.

Catch-22

In order for a business to get scored by the Paydex rating system, a business must have borrowed financing. However, in most cases a business will already need to have established a credit report in order to get financing. It may seem like an impossible catch-22 situation but there is a way to get started.

Dun & Bradstreet offer what is called a DUNS number. This is a 9-digit identification number stands for Data Universal Numbering system and it identifies your business. Unlike individual Social Security numbers or tax identification numbers, it will cost you to get a DUNS assigned to your company.

Getting Started

In order to start your business credit report, you may need to utilize your person credit initially. Start with local suppliers you use and build a solid reputation for paying bills on time. After receiving your DUNS account, you should be able to open a business line of credit with regular vendors. Ask if the vendors report back to Dun & Bradstreet and provide the business with your DUNS identification. The better your payment history is with regular vendors, the more you will build up your own business credit report.

Is a Business Credit Report That Important?

Again, a business credit report is just as important to a business as a credit report is to an individual. If your ratings are low, you may not only find it hard to do business with vendors, other companies may run credit checks on you for reliability. A low score may mean you also lose profits due to the lack of customers coming your way. Paying bills on time or even early is the best way to build a solid credit foundation for your business, which is a necessity for building a strong business.  Another helpful tip is open the best small business credit card to make sure you are getting the best rates and paying the lowest fees.

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