I was excited to write this particular post because there is such a tremendous lack of awareness in the entrepreneur and small business community surrounding the business credit industry.
I have assembled my ‘Top 10 Credit Reporting Agencies Every Business Owner Should Know’ in order to full educate the entrepreneur and small business community on what’s available in the marketplace to grow and maintain their credit files.
While the majority of consumers are fully aware of the three main consumer credit reporting agencies known as Equifax, Transunion, and Experian there are a few that realize that there are six other separate business credit reporting agencies that specifically collect data on businesses.
The tenth reporting agency is extremely important as it has to do with you’re ability to open up a checking account with a financial institution. Banks use a reporting agency known as ChexSystems which is a network comprised of member Financial Institutions that regularly contribute information on mishandled checking and savings accounts to a central location.
Here are a few examples of the difference between a personal credit rating and business credit rating.
A personal credit score is based only on credit history whereas a credit rating for a business takes into consideration other factors like company size as determined by assets and number of employees.
Also a personal credit score is based on financial information provided by credit card companies, retail stores, and financial institutions whereas 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.
Here are the Top Business Credit Reporting Agencies Every Entrepreneur Should Know About
D&B is the primary business credit reporting agency. For years, D&B has offered a variety of ratings tools that can be used to determine whether to engage in business with a particular company and to determine loan terms. For a business to get listed with this agency it needs to first obtain a DUNS Number. The most commonly used business credit score for vendors to determine a businesses’ credit worthiness is based off of D&B’s Paydex score.
Equifax Small Business Enterprise
Equifax, one of the three primary consumer credit rating agencies, also provides business credit evaluations for over 22,000,000 small businesses and corporations. Equifax has developed its own business credit score known as the Small Business Credit Risk ScoreTM. This evaluation is based on a combination of reported financial transactions, including banking, leases, trade accounts, public records, as well as the demographics of the business.
The Financial Services Credit Risk ScoreTM assigns a score from 101-992 with the highest score indicating the lowest risk of delinquency and the lowest score indicating the highest risk of delinquency.
The Suppliers Credit Risk ScoreTM assigns a score from 101-816 with the highest score indicating the lowest risk of delinquency and the lowest score indicating the highest risk of delinquency. These scores also include explanations of why a particular business earned that score based on a series of reason codes provided in the report.
Experian SmartBusinessReportsTM
Experian is another one of the three primary consumer credit rating agencies who provides business credit evaluations. Unlike D&B and Equifax, Experian’s SmartBusinessReportsTM doesn’t assign a business credit score. Given this information, it would be up to the lender to interpret the risk associated with this type of payment history.
Credit.net is a division of InfoUSA® that generates credit reports on approximately 15,000,000 businesses. There are 6,000,000 of the reports in their database that have been completed on small businesses with four employees or less. The credit analysis provided by Credit.net relies on four criteria: years in business, number of employees, public records, and stability within the industry. Its business credit score is a grading system from A through C (70-100) and is awarded as an evaluation of the company’s credit history.
This is a new business that is a combination of forces between The Better Business Bureau (BBB) and LexisNexis, one of the leading providers of business services and information. AccurintRBusiness is like Experian in that they provide public and business profile information, including credit history based on payment patterns of small, medium, and large companies. This company provides a payment history only with no type of unique business credit scoring system.
This is a credit reporting bureau that started in 2003 and specifically targets small businesses, freelance professionals, and contractors seeking information to help them determine which other businesses they should do business with. Rather than providing a fixed business credit score, ClientChecker compiles information based on feedback from its members.
*Another business credit reporting agency worth mentioning is Paynet
Paynet is the premier provider of risk management tools and market insight to the commercial credit industry, collecting real-time loan information from more than 200 leading U.S. lenders.
The company’s proprietary database is the richest and largest collection of commercial loans and leases, consisting of more than 14 million current and historic contracts worth $645 billion.
These business credit reporting agencies allow a business to establish its own credit profile, scores, and payment history. The challenge for entrepreneurs and small business owners is realizing that a business credit file will not be established unless the file is initially set up and activated by the business owner.
I encourage all entrepreneurs and small business owners to separate your personal credit from your business credit and position your business for unlimited financing potential.
Looking to build your business credit? 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 vendor lines of credit, fleet cards, business credit cards with and without a PG, 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 business credit building audio seminar ($597 value) =>
To Your Success In Business and in Life!
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.
I felt inspired to write this post after receiving so many questions about business credit and how you go about getting approved for cash credit lines despite the current credit crunch in the economy.
Lending institutions want to lend money because it’s the way they make money. However, they only want to lend money to a borrower who is able to repay the loan on time and in full.