business credit history

Your business credit history, which is documented in your business credit report, is an essential tool used by banks, online lenders, loan companies approved by the Small Business Administration, suppliers, and credit card companies to determine the creditworthiness of organizations and whether to offer them a business loan or other financing. The information contained in a report provides crucial details needed to make informed credit decisions.

Business credit reports are also checked by insurers when they underwrite policies. Good credit is a sign of a responsibly run business, which earns lower premiums.

This article explains what you should know about your business credit history, along with the steps you can take to improve your business credit report and business credit score.

Business credit history: The basics

Your business credit history and related credit report include information that financial institutions, lenders, suppliers, and credit grantors need to decide whether a small business is a reasonable credit risk.

It indicates whether a company can meet its contracted financial obligations based on its payment history and other public information.

How is the information in a business credit report used?

The data in a small business credit report is a vital factor in securing the funding you need to successfully run and grow your company, whether it’s a term loan, business line of credit, business credit card, or other funding.

It can have a significant impact on the following financial decisions:

  • How much credit or funding a bank or lender will provide to you
  • Your repayment terms
  • The interest rates you’ll pay
  • How much business credit a supplier will extend to you
  • How prospective customers and clients view your business
  • The insurance premiums you pay
  • And more.

Clearly, your business credit history can have a major impact on your company’s future finances.

What companies monitor business credit histories?

Business credit reporting agencies, including Dun & Bradstreet, FICO, Experian Commercial, and Equifax Small Business collect data on millions of businesses. They compile that data into a business credit report for each company. All the information in a company’s report is used to calculate a business credit rating.

What information is included in a business credit report?

A business credit history typically includes the following business information:

  • Ownership
  • Number of employees
  • Annual sales and revenue
  • Subsidiaries and affiliated companies
  • Historical business data
  • Business registration details
  • Government activity
  • Business operational data
  • Industry classification
  • Public filings, including liens, judgments, and UCC filings
  • Past payment history
  • Collections
  • Number of accounts reporting to the agency about the business and details.

Typically, all business credit reports contain similar information. However, each business credit reporting agency has its own methods for collecting, verifying, and evaluating data.

The first section of a business credit report is the company profile or information section. It lists the company’s legal name, address, incorporation details, ownership, subsidiary information, and the number of employees.

The business credit information section includes financial data such as annual sales. It might include a financial statement, as well.

The payment history area provides information about how a business paid its bills over the past several years, including invoice activity, outstanding balances, payment terms, and credit limits.

The public records section has a list of legal filings, bankruptcies, collections, and UCC filings. Any legal judgments or collections activity in this section will be viewed negatively by financial companies, lenders, and insurers.

Finally, the business credit agency will issue a business credit score or rating that demonstrates how likely a company is to pay its debts and meet its financial obligations.

Business credit histories, reports, and scores reflect a company’s financial strength and stability. Small business owners must establish records of timely payments across all their financial obligations — and maintain a clean legal record — to build a solid business credit report and score.

Be aware: Anyone can check a business’s credit scores, unlike consumer scores which are restricted to anyone with a permissible purpose under federal law, such as loan providers, insurance companies, and rental agencies.

What is a good business credit score?

Personal credit scores indicate the creditworthiness of individuals. Business credit scores do the same for companies. Personal credit scores range from 300 to 850. Business credit scores vary depending on the credit reporting company.

  • Intelliscore Plus from Experian scores range from 1 to 100. A higher score on your Experian business credit report, typically over 80, indicates a lower risk to lenders. More than 800 variables are considered in these scores, including tradeline and collection information, public filings, new account activity, key financial ratios, and other performance indicators.
  • Dun & Bradstreet assigns scores on a scale of 1 to 100, with 100 being the top PAYDEX score. A score of 0 to 49 indicates a high risk of late or missed payments; 50 to 79 is a moderate risk; 80 to 100 predicts a low risk.
  • Equifax Business Credit Risk Score ranges from 101 to 992. A score of 556 or greater is generally considered good credit.
  • FICO® LiquidCredit® Small Business Scoring Service℠ rank-orders loan applicants by their likelihood of avoiding late payments. Scores range from 0 to 300. The higher the score, the better. The scoring is based on both personal and business credit data and other financial information. A strong history of timely payments to vendors and suppliers may help boost your SBSS rating. A score of 140 or higher is considered good.

If your business credit scores aren’t high enough, focus on paying bills on time, increasing your savings, improving business cash flow, and upping your annual revenue. It will help you qualify for financing with favorable interest rates and loan terms.

Business credit reports versus personal credit reports: The difference

Business and consumer credit reports serve similar purposes. They provide lenders with the information needed to determine your likelihood to repay a loan or other type of business financing. They differ in the information they contain and their accessibility.

Business credit reports contain certain types of information about a company, such as ownership, subsidiaries, company finances, company size, risk score, company’s payment history, and tax liens or bankruptcies. Business credit bureaus start collecting information for a company’s credit report as soon as it’s incorporated, receives a federal tax identification number, and gets a D-U-N-S number. Unlike consumer reports, business reports are public information. Anyone can access them, including insurance companies and consumers researching organizations they’re thinking about doing business with.

By contrast, consumer credit reports only include information about an individual’s personal finances, such as their credit, closed, and delinquent accounts, credit utilization, along with any liens or bankruptcies. Your personal credit file can only be accessed by the individual and by people at organizations that have a permissible purpose to see them. Consumer credit monitoring and reports are available through Experian, TransUnion, and Equifax.

Business credit history: Bottom line

Your business credit score can make or break your company. If it’s too low, you could find it impossible to secure reasonable financing. If it’s high, you will likely be able to qualify for funding at low interest rates with favorable terms that could help your business grow long into the future.

Learn about the Biz2Credit financing process

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