Building Business Credit for Small Business
Do you know what Abraham Lincoln, Ulysses S. Grant, Grover Cleveland, and William McKinley all have in common other than being U.S. Presidents? 
They all worked as credit reporters at The Mercantile Agency, a predecessor to Dun and Bradstreet.
The history behind the business credit reporting giant, Dun and Bradstreet, is fascinating stemming all the way back to an American businessman and entrepreneur known as Lewis Tappan.
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Is your company listed with the major business credit bureaus?
Do you know that there are over 30 business credit reporting agencies in America?
With so many companies in the business of collecting commercial information it can be quite a challenge deciding which ones are most important for your company to get listed with.
For starters you should focus on getting listed with the top three business credit reporting agencies which are Dun and Bradstreet, Corporate Experian, and Small Business Equifax.
In a press release today Dun and Bradstreet announced that it joined forces with Transunion to blend consumer and business credit information in order to improve the overall risk assessment of small and micro businesses.
This is a major announcement that impacts both lenders and small businesses on a national scale.
Over the past couple of years the economic downturn has given the word “risk assessment” a whole new meaning. It was only a matter of time when a new dimension of analytics would begin to take shape and this is just the beginning.
As you know there are millions of pieces of data that are collected on consumers from consumer reporting agencies like Transunion (500 million to be exact) and millions of business records are compiled from business credit bureaus like Dun and Bradstreet (150 million to be exact).
With all this information is it any wonder that one day we would see the merging of credit data from two leading companies.
According to Byron Vielehr, president of D&B Global Risk and Analytics, “Small businesses’ credit-worthiness can be correlated to consumer credit history.”
I would have to disagree simply from the fact that there are certainly other events or circumstances that may cause a business owner to incur personal credit challenges while the financial responsibilities of the business remain intact.
If a business owner truly separates his personal credit from his business credit then there should not be a correlation between the two but unfortunately the majority of owners continue to co mingle personal and business expenses to this day.
In August of this year D&B plans to launch its new Commercial Credit Score 8.0 which incorporates consumer credit data from Transunion with D&B’s business records giving its customers a newly enhanced scoring system.
It will be interesting to see the impact this will have on small businesses and its ability to obtain financing with little to no trade credit with D&B.
If merging consumer credit data from Transunion has a positive impact on its commercial credit score it may just be the answer some small businesses have been waiting for.
However, what type of impact will this have on the businesses with strong D&B ratings but little to no consumer credit? What about the business with a strong paydex score with financial stability but the owner has a dismal consumer credit file with Transunion?
I’ll keep you posted on new developments as they become available.
Read the full press release ‘D&B Announces Services for Customers to Better Predict Small Business Credit Risk’
Looking to access a proven step by step business credit building system? A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus? Become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>
About the Author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit builder membership helping business owners establish business credit. He is a business credit blogger for All Business.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.
There’s been quite a stir on the integration of FICO® 08 which is the credit scoring system used by the majority of lenders to determine a consumer’s credit worthiness. Similar to your personal credit ratings, businesses and corporations also have business credit ratings that potential lenders use to determine its credit worthiness.
Unlike a personal credit rating, there is no designated standard for determining the credit worthiness of businesses. However, the main tool used to determine and establish company credit ratings is D&B’s PAYDEX system.
Where a personal FICO® score is based only on credit history that includes information on how much a person borrows and how well they repay loans, a credit rating for a business takes into consideration company size as determined by assets and number of employees.
Where personal credit ratings are based on financial information provided by credit card companies, retail establishments, and financial institutions, a business credit report and rating is determined by information supplied by the business owner and gathered from vendors, suppliers, and other trade accounts.
For this reason, potential lenders may be different from one another in their evaluation of a business’ credit history by emphasizing certain qualifications more than others.
Like most industries, there is a specialized language involved with business credit reports and ratings.
The following is a list of some of the most common concepts and terms as well as their definitions:
Average High Credit / Highest Credit
In order to put a business’s credit in perspective, these are based on the total amount of credit owed as compared to the industry as a whole.
Business in Good Standing
Includes any problems with the business overall.
Commercial Credit Score
A D&B prediction regarding the chances of an account becoming severely delinquent within one year.
Comprehensive Report
This is a combination of several D&B business credit reports that paints a more complete picture of the company’s credit history. It includes the results of the PAYDEX analysis, a company’s credit score and Financial Stress class, as well as any public filings or liens, the business’s history and operations (including when it filed for incorporation, annual financial statements, facilities, affiliations, and number of employees).
Credit Score Class
This is part of the D&B assessment that gauges payment habits to determine how likely it is that a potential account will be delinquent in the next 12 months. The scoring can range from 1 to 5 with 1 being the score assigned for the lowest risk and 5 for the highest.
Financial Stress Score
This is part of the D&B assessment that analyzes the Financial Stress that a business is experiencing in order to predict how likely it is that a business will fail in the next 12 months.
PAYDEX
This is D&B’s primary assessment that analyzes how likely it is that a company will make its future payments on time. An 80 paydex score for a business can be compared to having a 720 personal credit score.
Sample business credit reports:
Dun & Bradstreet business information report sample
Dun & Bradstreet enhanced comprehensive report sample
Dun & Bradstreet Credit eValuator Plus Report sample
Corporate Experian Business Credit Score Report sample
Small Business Equifax Commercial Credit Report sample
To order business credit reports:
Equifax Small Business Enterprise
Experian SmartBusinessReportsTM
Every business will at one point require an influx of cash in order to cover operating expenses, expansion costs, legal fees, inventory or a range of other items the business may require in order to operate. The worst mistake you can make is seeking funding when your business needs it most. Lenders extend cash credit lines to businesses that don’t need the capital and have strong business credit ratings. Start digging your well before your business gets thirsty!
Are you ready to start building your business ratings? Become a member of my Business Credit Insiders Circle and gain access to a proven step by step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>
About the Author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit solutions membership helping business owners build small business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.
