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Checklist on Better Understanding Your Business Credit Reports

Author: Sharita M. Humphrey

A company’s capacity to buy something now and pay for it later is referred to as business credit. You may make it easier to borrow money when your firm needs it by obtaining a solid business credit report. It is a document that contains a picture of a company’s financial credit health.

 

It will include.

  • Company’s financial background
  • Payment history on tradelines
  • Current credit inquiry history
  • Any legal filings, such as judgments, collections, and bankruptcies

While each credit bureau’s report will differ slightly in appearance, they will all contain the same information. As you proceed through the process of securing a small business loan, it’s a good idea to buy a credit report and understand it. Any business credit report you buy should include the following items.

  1. Financial History Section

The Financial History Section is composed of commercial banking, insurance, and leasing data. Your payment history with creditors, lenders, and insurance are shown in this section.

It displays information such as:

  • The date the tradeline was opened
  • The terms
  • The original and current balances
  • Any account delinquencies
  • Business loans
  • Insurance policies
  • Lines of credit
  • Equipment leases
  1. Collections Filings Section

Any legal filings, bankruptcies, or collection reports that your company has filed are in this area. Tax liens, judgments, and accounts that have been in collections for 90 days will be included here.

It includes details such as:

  • Open and Close dates of your collection filings
  • Agencies and their contact details
  • The status of your collection
  • Amount disputed
  • Amount collected

Lenders are less likely to give loans to you if you have a lot of court filings on your background.

  1. Tradeline Experiences Section

The Tradeline Experience Section shows the tradeline payment history of your business. Displayed in the tradeline payment history section is your company’s payment history over the last three years. Payments to vendors are frequently included in this section.

In addition, here are some details included in this section:

  • The time your business was first initially reported to the credit bureau
  • Payment terms
  • Recent high credit line
  • Maximum credit line
  • Monthly payment, whether it’s current or past due

It will also tell you how many times you’ve passed due on a tradeline for 30 days or more.

  1. Business Profile Section

The business profile or company information section is the first thing that appears on a small business credit report. The legal name, address, and data about the company’s incorporation are shown in this section.

It also includes other business data such as:

  • Ownership subsidiary information
  • The number of employees
  • Type of business
  • Years in business
  • SIC code (Standard Industrial Classification)
  • NAISC code (North American Industry Classification System)
  1. Business Credit Score Section

A credit score will be included in a company credit report, just as it is in a personal credit report. Each credit reporting bureau has its own credit scoring range. They should all produce an easily understandable number.

A business credit report states some business information such as:

  • Your company’s degree of credit risk
  • The reasons that went into calculating your credit score
  • A prognosis of your company’s future credit risk based on your report

Credit reports and scores for businesses are indicators of a company’s financial soundness. Business owners’ primary goal should be to develop a track record of regular payments on all their financial obligations. It is a must to build a strong business credit report and score.

Here are some common factors that could affect your business credit score:

  • How much credit do you have
  • How long you’ve had credit
  • How many late dues do you have on your credit report

You can try to buy a business credit report to help you maintain track of your company’s credit health. It is regardless of which credit reporting agency you choose.

Business Credit Reporting Agencies

There are many business credit reporting agencies you can trust. In most cases, all company credit reports contain the same information. They have common key data components even when they have a unique process for validating and collecting data.

The following are some of the most well-known business credit reporting organizations.

Dun & Bradstreet

It is the credit report that is most widely used. D&B assigns credit ratings to businesses based on many indices that represent their current and future financial risk.

Experian

To calculate its score, it gathers business data, payment and collection history, and financial data. The Credit Ranking Intelliscore from Experian goes from 1 to 100, with 100 being the highest attainable score.

The FICO® SBSS

It is most commonly used for SBA (Small Business Administration) financing. To generate a credit score, it gathers information from all three credit bureaus.

Conclusion

The more efforts you take to establish business credit, the more financial prospects your company will have. Banks, lenders, and suppliers use business credit reports to determine a company’s creditworthiness. So, make every effort to control your debt and keep on top of payments.

You can start to make paying bills on time a priority. Resort to make a budget, cut back on certain purchases, or set up payment reminders. Any late dues will have a negative impact on your company’s score. And it will make it harder to attract lenders, partners, or investors in the future.

Don’t hesitate to seek professional help from a financial counselor. It helps in times when your company does find itself in debt.

About the Author: Sharita M. Humphrey is an award-winning finance expert, money mentor and Certified Financial Education Instructor. Once broke and homeless, Sharita completely transformed her life and is now a successful entrepreneur and one of the most in-demand money coaches for individuals and business owners of color. In 2020, Sharita was named National Financial Educator of the Year.

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