Business credit reports are regularly requested by investors, insurance companies and potential business partners. Understand how business credit reporting agencies work and monitor your company reports regularly.
Marco Carbajo, guest blogger for the SBA, is a business-credit expert and founder of the Business Credit Insiders Circle. Carbajo shares the following insights to how your business credit report works:
Your business credit report lists what types of credit your company uses, the length of time the accounts have been open, and whether the company has paid its bills on time. It tells lenders how much credit your company used and whether you are seeking new sources of credit. The information is used to calculate your company’s business credit rating.
Business credit reporting agencies such as Dun & Bradstreet, Paynet, Experian Business and Equifax Small Business are powerful companies. One negative mark on your company’s report can cripple your borrowing power for years and may cause you to receive less than favorable credit terms and interest rates.
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Every time your company applies for credit, the bank, credit-card issuer, supplier or creditor initiates a credit inquiry to one or more business credit reporting agencies to review your company’s credit rating. They decide whether or not to extend credit and at what interest rate based on the credit history reported by those agencies.
How credit reporting agencies collect information:
- Payment and banking data from suppliers and creditors
- Suits, liens and judgments
- Uniform Commercial Codes (UCC Filings)
- Business registrations (state, city, county courts)
- Incorporation and bankruptcy filings from state and country courts
- Corporate financial reports
- Contracts, grants, loans, and debarments from the Federal government
- Internet web mining
- News and media stories and company press releases
- Yellow pages and other print directories
- Direct investigations and interviews with company principals (self-reported data)
- Other companies that have granted a company credit
It’s vital to review and ensure the information being reported about your business is accurate and current. Consider using a monitoring service to keep an eye on changes to your report. Details at http://tinyurl.com/opoecg6
Diane Diamond is vice president of media relations for SCORE Southern Arizona, a nonprofit group that offers free small-business counseling and mentoring by appointment at several locations. For more information, go to www.southernarizona.score.org, send email to mentoring@scoresouthernaz.org or call 505-3636.
