business credit reporting agencies

How Do Business Credit Reporting Agencies Work?

Establishing good credit is an excellent way to let vendors and clients know that you’re trustworthy. Business credit reporting agencies are in charge of gathering information about your business credit history from various sources. Once this information is collected, they create a business credit report.

A good credit report can help enhance your business by increasing financial opportunities and loans. Although there are three main business credit reporting agencies to be aware of, many more exist. Here is an inside look at how business credit reporting agencies work and why it’s important to establish good business credit.

What Does A Business Credit Reporting Agency Do?

Creditors, suppliers, and banks run a risky business by lending out money. They need to determine how to make a profit by offering loans or credit to companies who are trustworthy and will repay on time. Lenders reduce their risk and decide who to issue a loan to by looking at a company’s business credit report.

A business credit report helps lenders determine a company’s finances, operations, and many other factors about its borrowing history. Lenders use this information to determine how trustworthy your business is. If your company has been negligent on payments, the lender may deny you a business loan or charge you a higher interest rate.

Your company’s business credit history is put together and maintained by business credit reporting agencies. Much like your personal bank may collect credit history on you as an individual, a business credit reporting agency collects history on your business. It compiles information from suppliers, banks, credit card companies, and other lending services to produce a credit history report. This information is used to determine your company’s business credit rating.

Information on your business credit report may contain the following: what type of credit your business uses, the amount of time your account has been open, and whether your company pays its bills when they are due. It also provides information regarding how much credit your business has used in the past as well as whether or not you’re seeking new credit. Lenders use this information to determine your company’s credit history and can compare it against other sources of data to determine its accuracy.

The top three business credit reporting agencies are Equifax, Experian Business, and Dun & Bradstreet. If one of these companies gives you a negative mark on your company’s business credit report, it can reduce your ability to take out a loan for years. It may also cause you to receive higher interest rates or poor credit terms. Additionally, business credit reports are viewed by other prominent groups, such as insurance companies, potential business partners, and investors. Because of this, it’s important to know how credit reporting agencies work. You’ll also need to monitor your business credit reports frequently to catch errors.

Each time your company applies for credit, the crediting agency inquires about your credit report and rating from at least one business credit reporting agency. These agencies decide whether or not to offer a loan or credit to your company. They also determine what your interest rate will be by looking at your credit history.

Keep in mind that business reporting credit agencies collect information on millions of businesses throughout the world. Because of this, there is room for error. You’ll need to monitor your business credit report and make sure it’s current and accurate. There is a wide variety of criteria that can change your ratings and reports; therefore, it might be a good idea to use a service that monitors your credit report for you. It’s crucial that you’re aware of what information suppliers and creditors see when they view your company’s report.

Business reporting agencies collect their information from the following sources:

  • Companies that have granted your business credit
  • Corporate financial reports
  • Print directories, such as yellow pages
  • Internet findings and self-reported data from interviews and direct investigations with your company
  • Media and news stories and company press releases
  • Loans, grants, contracts or debarment issued by the Federal government
  • Liens, suits, and judgments
  • Uniform Commercial Code (UCC Filings)
  • State and county court records regarding bankruptcy and incorporation filings
  • County, city and state business registrations
  • Banking data and payment history from creditors and suppliers

Why Is It Important To Build A Good Business Credit Report?

Your company’s business credit report says a lot about the inner makings of your business.  It provides valuable information, such as financial data, background information, company size, payment history and trends, and public filings to investors, lenders, and suppliers. Your credit scores and reports are always changing due to outstanding balances, payment history, and other factors such as trade lines. Keeping an eye on your business credit report is necessary to watch for errors that could affect your ability to acquire credit or loans in the future.

It’s important to build a good business credit report because investors and credit suppliers use this information to determine whether or not they will work with you. The information on your report indicates what other companies you are working with. Building a good credit report enhances your business should you ever decide to sell one day. Potential business partners may choose not to work with you if you don’t have a good credit history. It also signals to credit card companies how likely you are to repay loans and at what interest rate they should charge you.

Your company’s business credit report may affect you in several ways. First, your credit report tells a business credit reporting agency whether or not to grant you credit as well as what the terms and conditions will be. You can also use a company’s credit report to establish terms for a client looking to make a purchase based on your position as a report user. You can look at a potential supplier or vendor’s credit report to determine how risky it will be to work with them.

Finally, you can alert your business credit reporting agency when a customer pays you on time. This will help you establish rapport with other companies you work with. Keep in mind that if you make a payment on time, this information can be reported back to your credit report as well.

How Many Business Credit Reporting Agencies Are There?

The three leading business credit reporting agencies are Dun and Bradstreet (D&B), Experian, and Equifax. However, there are many more that exist. Some are even specific to a particular area, such as construction or trucking. They are in charge of compiling information about your company’s credit history and then creating a report out of it. Depending on your business, it might be worth getting listed by several different agencies. Here’s a look at some standard options.

  1. Dun and Bradstreet (D&B)

With more than 70 million registered businesses in its database, D&B is the largest business credit reporting agency. The company works by issuing a paydex score that is based on your DUNS rating, payment experiences, and other financial information.

D&B credit reporting agency
  1. Experian SmartBusiness Reports

As one of the top three primary credit bureaus, Experian provides business credit evaluations as well as credit reports. Their system, known as SmartBusinessReports, is responsible for assigning a business credit score that the company refers to as Intelliscore.

experian smart business reports
  1. Equifax Small Business Enterprise

Rounding out the top three business credit reporting agencies is Equifax. They provide business reports and evaluations for more than 22 million small business corporations.

Equifax Business Enterprise
  1. ChexSystems

ChexSystems might not be as big as one of the top three business credit reporting agencies, but it’s worth knowing about. That’s because banks use this company to contribute to information regarding mishandled savings or checking accounts. It is comprised of several financial institutions that play a significant role in your business’ ability to open up a checking account.

ChexSystems - Business Credit Reporting Agenci
  1. PayNet

PayNet gathers information from over 200 lenders in the United States. Located in its databases are many commercial leases and loans. It also contains the largest database of long-term debt acquired over ten years.

PayNet Credit Reporting Agencies
  1. Credit.Net

Credit.Net has generated business reports on 15 million different companies.

They use four different factors to determine your credit analysis:
  • The number of employees your business has
  • How many years your company has been in service
  • Your company’s industrial stability
  • Your company’s public records

After evaluation, your company will be given a business credit score of A to C, which stands for 70 to 100, respectively.

  1. Accurint Business

As a relatively new business, AccurintRBusiness is a combination of the Better Business Bureau (BBB) and LexisNexis, a leading provider of business service. AccurintRBusiness allows you to get small business records for over 150 million businesses in the United States. You’ll have access to payment and credit data, data from public records, and a membership report from the BBB.

Accurint Business

How To Use A Business Credit Reporting Agency

To register with a business credit reporting agency, you’ll need to have your company’s EIN or DUNS on hand. You’ll also need a few other key pieces of information. The IRS issues your EIN. It’s a nine-digit number that identifies your company. You can find this number on your bank statement or an employee’s W2 form.

If you haven’t filed for one already, you can do so over the phone, online, through the mail, or via fax. To apply online, you’ll need to use an online EIN application. To get an EIN through a toll-free phone number provided by the IRS, call 1-800-829-4933. You can request that an EIN registration form be sent to you via fax or mail.

Be sure your corporation is fully established before applying for an EIN. Otherwise, you’ll be subject to tax-exempt status automatically for three years if you do not file a notice. Applying for an EIN tells the IRS that you already have a business formed and to start running the clock on your three-year period.

Your DUNS is also a nine-digit number. It’s issued by the major business credit agency D&B. The registration process is free if you have a business that is required to report to the federal government and takes around 30 days to obtain.

To get a DUNS number, you’ll need the following information:

  • Whether or not your business is home-based
  • Your company’s legal name
  • Where your company is headquartered along with its address
  • The physical address of the business complete with city, state and zip code
  • Mailing address if it’s different from the physical address or headquartered address
  • Any DBAs or other names your company goes by
  • The number of employees you have
  • Your organization’s telephone number
  • A contact title and name

After you have this information, you can register to obtain a DUN with the company’s website. When you get a DUNS or EIN, go directly to the website of the business credit reporting agency of your choice and register with them. You can do this online or contact a service agent. You’ll need to include your legal company’s name and address. After you’ve registered, ask any companies that you are currently working with to report whenever you make a payment on time. This will help improve your business score ratings.

Small business owners can ask to obtain credit reports on a client or partnering company after registering with a credit reporting agency. You can access this information either directly from their website or via another credit reporting agency. If you obtain a credit report to decide whether or not to work with another company, make sure you don’t pass on any information that you find, or you will be considered a consumer reporting agency.

You can tailor your credit reporting service to fit your needs by talking to an agent at whichever company you decide to go with. For example, you may wish to go with a package that includes credit information, employee background checks, business risks or marketing opportunities. Any agency you choose should be able to inform you of the laws and procedures needed to make the right choice.