How to Read Your Business Credit Report
Most people know that good credit holds a lot of weight. It can help you get loans, good interest rates, credit cards with wonderful perks, the list goes on. If you own a business, you may not be aware that you have a business credit score in addition to your personal credit score. The two have some similarities, but some key differences as well.
Credit, both personal and business, can be a little tricky to understand. Obviously paying on time will help, missing payments will hurt, but there are many more subtle things that can make a difference. Reading a business credit report can alert you to potential mistakes that are hurting your score. There are three major different credit bureaus: Equifax, Dun & Bradstreet and Experian. They each have different ways of determining your credit score, so it’s important to understand the basics of each so that you know what each one means for your business.
Equifax uses three different assessment tools: the credit risk, the payment index and the business failure scores. The credit risk score assesses how likely your business will miss payments. It takes into account how many credit lines your business has open, the size of your company, delinquency to non-financial accounts (such as to suppliers) and the length of time since your oldest account was open. The payment index simply shows how many of your payments were made on time. The business failure score assesses how likely your business is to fail.
Dun & Bradstreet uses a PAYDEX score, which is similar to Equifax’s payment index. This company also gives you a business credit score, ranging from one (best) to five (worst), and a financial stress score. This assesses your and similar businesses and uses the information to indicate how likely you are to pay on time.
Experian uses a CreditScore report, which contains lots of different information, such as a credit score, account histories, payment trends and any other public pertinent information. Some of the factors that Experian uses include payment history over the past year, percentage of available credit that you used, new credit lines, years in business, among others. The score ranges from 1-100.
Each of the business credit reports will cost money, but it’s very important to know what your report shows so that you know where you can make improvements. As stated earlier, you can also learn of any mistakes that are unnecessarily hurting your business. Having a good credit score can be very helpful when you need a loan or new credit line and what business doesn’t need that from time to time?
