If you’re a business owner seeking financing, your business credit report plays an important part in the approval process. Lenders use this report to evaluate your company’s financial responsibility and determine whether you qualify for a loan or line of credit. 

A strong credit report could open the door to better financing options, while a weak one may limit opportunities. Let’s delve into what makes up a business credit report and how it influences your borrowing potential:

What is a Business Credit Report?

A business credit report is a company’s financial profile that lenders, vendors, and even potential partners use to assess creditworthiness. 

Just like personal credit reports, business credit reports track a company’s financial behavior, including its history of borrowing and repaying debts. These reports are compiled by credit bureaus such as Dun & Bradstreet, Experian Business, and Equifax Business. 

What Lenders Are Looking at in Your Business Credit Report

Lenders use business credit reports to evaluate how well a company manages its financial obligations. 

Here are some of the most important factors they consider:

  • Payment history: Lenders want to see if you pay your bills on time. Late or missed payments could hurt your business credit scores.
  • Late payments: A pattern of late payments could suggest financial instability, which might make lenders wary of offering credit.
  • Tax liens: If your business has outstanding tax liens, lenders may see this as a red flag, indicating potential financial trouble.
  • Collection accounts: Accounts sent to collections may signal financial distress and could lower your credit scores, making it harder to secure financing.

Lenders often use these factors to help determine the level of risk that may come with lending your business money. 

Is a Business Credit Report Different Than a Personal One?

Yes, business credit reports emphasize commercial transactions and financial obligations specific to your company, while personal credit reports reflect individual financial activities.

Do Personal Credit Scores Impact Business Credit Scores?

In some cases, yes. While business and personal credit scores are separate, lenders often consider an owner’s personal credit, especially for small businesses or startups with limited business credit history. 

If your business doesn’t have an established credit profile, lenders may require a personal guarantee, meaning your personal credit score will play a role in their decision.

What is a “Good” Business Credit Score? 

A “good” business credit score depends on the scoring model used by different bureaus. Here’s a general guideline:

  • Dun & Bradstreet
    • Paydex (1–100): 80 and up is ideal.
    • Failure Score (1,001–1,875): Lower scores mean higher bankruptcy risk.
    • Delinquency Score (1–5): Lower is better.
  • Equifax 
    • Payment Index (0–100): 90 and up means on-time payments.
    • Credit Risk Score (101–992): Higher scores signal lower delinquency risk.
    • Business Failure Score (1,000–1,880): Lower scores indicate higher closure risk.
  • Experian
    • Business Credit Score (1–100): Higher is better.
    • Financial Stability Risk Rating (1–5): Lower means lower default risk.

Each bureau assesses risk differently, so businesses should monitor multiple reports for a complete picture.

How are Business Credit Scores Calculated?

Business credit scores are calculated based on multiple factors, including:

  • Payment History: Making payments on time has the biggest impact on your score.
  • Credit Utilization: Using too much available credit can negatively affect your score.
  • Company Size and Age: Older, well-established businesses typically have stronger credit profiles.
  • Public Records: Bankruptcies, liens, and judgments can significantly lower your score.
  • Industry Risk: Some industries are considered riskier than others, which can influence your score.

Each credit bureau weighs these factors differently, so your scores may vary across different reports.

How Can You Check Your Business Credit Score?

You can check your business credit score through major credit bureaus such as Dun & Bradstreet, Experian, and Equifax. Regularly monitoring your score helps you spot errors early and make corrections to keep your credit profile in good shape. 

Managing your business credit score takes attention and knowledge. By staying on top of your business’s financial responsibilities and regularly reviewing your credit report, you can improve your company’s reputation with lenders and open the door to valuable financing options.