The Big Three Who are Looking at Your Business Credit.
Dun & Bradstreet
Business Credit and the Reporting Companies
The largest company for reporting business credit is Dun & Bradstreet. They are ten times larger than their closest competitor, who is Experian. This does not mean that just getting set up with Dun & Bradstreet will handle all your business credit needs. Various lenders, vendors and contract suppliers utilize the various resources to get a full picture. Lenders may use a Dun & Bradstreet report as well as an Experian report to complete their file. Although there are numerous players in the field the top three to be concerned about are Dun & Bradstreet, Experian and Equifax. To properly set up your Business Credit File you must maintain an account with each of these providers.
Dun & Bradstreet – The most widely used report for vendors.
Experian – The business credit division is called Experian Commercial and used by credit card companies and non-traditional lenders..
Equifax- The Business Credit division of Equifax is called “Small Business Financial Exchange” and is mostly used by cash lenders such as banks.
As you can see each of thr top three are focused in different areas and used by different industries, that is why it is important to build credit with them. A well rounded credit file should consist of vendor credit, business credit card credit and traditional lender credit. This not only maximizes your exposure but also increases your borrowing ability.
Think of it this way, on your personal credit report, you have three reporting agencies, yet you may have a credit card or car payment that only reports to one bureau, that is because that lender only subscribes to that credit reporting agency in order to report. This is why when you go to get a mortgage in order to buy a house, the lender pulls a tri-merged credit report that consists of all three agencies in order to get a full picture of your financial fitness. The mortgage industry, specifically in the conventional finance arena, requires you to have a minimum of 5 pieces of active credit, This can consist of credit cards, car loans, student loans, or other types of financing. This is considered a well rounded credit file. But unlike business credit, factors like available credit verses the amount used and inquiries can have a damaging affect on your personal credit score.
Build Your File with the Three Reporting Agencies Today.
Getting Your Business Credit Noticed
Who's Looking at My Business Credit
We have talked about personal credit and how inquiries can actually be detrimental to your credit score. On your personal credit report there is a inquiry section so that you can view who has requested a copy. No one should be able to view your credit without your permission, this is part of the Fair Credit Act passed by Congress in 1971 to control the way credit reporting agencies did business.
In the business world there is no restrictions, anyone can pull your business credit without your permission and without your knowledge. This is one of the largest reasons for denial by a bank or a lending facility. You didn’t even know that they pulled your business credit and because of lack of information they denied your loan. Heck, you didn’t even know that there was such a thing as business credit. And to tell you the truth, even after the denial, you still won’t know. The bank will not tell you the reason they denied you, they will jsut send you a form letter stating you didn’t meet bank requirements or something close to that, but they still appreciate your business.
It is important to have a well rounded file, because of who may be looking at it and what report they are pulling up. As your financing ability grows and you seek more and more money for growth and expansion the more the lenders may look. It is not unheard of for a lender to request two or three agency reports to get a full snapshot of your businesses financial fitness. Underwriters are not in the business to approve loans, they are in the business to find reasons or risk factors to deny you. Having a professionally set up file that reports to all bureaus shows that you are a credible entity and worth the financial risk. You just never know which report they are going to pull or if they will pull multiple agency reports.
Getting set up is not job done! Maintaining the file is just as important as setting it up right. Updating information and keeping information accurate will set you up for an easier loan transaction with better terms and interest rates. The savings alone with a properly maintained file can be in the thousands if not more. Just on a credit card with a balance of $10,000 yourtotal interest payment based on 8% will be just over $1500, while with an interest rate of 18% your interest payment will be $5,000. That is a 30% difference, just on a small amount. Imagine on a $100,000 or $500,000 dollar amount. Is it worth the effort to build and maintain a business credit file?
According to Entrepreneur.com
“Education and empowerment around creditworthiness is a core issue, and can make or break a small business’s ability to get financing. Many business owners starting out are unaware of business credit, and may do significant damage to their credit without realizing it — primarily by maxing-out personal credit cards and/or credit lines because they believe they have no other choice. This short-term approach leads to significant long-term damage.”