A business credit report is an important tool that creditors use to decide if a company is eligible for financing. Suppliers sometimes also pull a company's credit report before extending credit on orders. If you're a newly established commercial entity, you should take the time to understand the various items that may be included in your business credit report.
Concept of a Business Credit Report
The concept behind business credit reports is similar to an individual's personal credit history. The agency reports information about various credit accounts and other financial transactions that the company performs over time. A number of credit reporting agencies, including Dun & Bradstreet and Experian Business, offer these reports for viewing by other entities who want to gauge the creditworthiness of the company in question.
What Is Included?
When reporting a business' financial history, credit bureaus commonly include information about company credit cards, loans and lines of credit. If the business owner opens a bank account in the company's name, that data are reported. Suppliers and vendors that do business with the company can also report information regarding the company's payment history. For instance, if the company does not fulfill an invoice per the agreed upon terms, a supplier can submit that information to a business credit bureau.
Business Credit Score
In addition to the financial history of the organization, business credit reporting bureaus also offer a credit rating for the company. Business credit scores range from zero to 100, and a score of 75 or better is generally considered a good credit risk. Like a personal credit score, this business score is based on the company's credit history.
How to Improve Business Credit History
One of the most crucial steps for improving a business credit history and score is to ensure that the company operates as a separate entity from the owner. So instead of continuing to operate as a sole proprietorship, the company owner can ensure that positive information regarding the company's financial activities gets reported to the business credit bureau by incorporating or creating a partnership. It's also important to get an Employer Identification Number (EIN) to separate the owner from the business. The business owner can then register directly with one or more of the business credit bureaus.The owner can also ask suppliers and creditors to report positive payment information to those bureaus.
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