Considering the difficulties of today’s competitive arena, a good credit profile is indispensable for long-run success in any business. Whether your business is about raising venture capital as a start-up or an established company that aims to expand its operation, your business credit score will play a major role in determining your financial opportunities. Just like individual scores, businesses have their grades on being worthy of credit. This score, then, gets captured and reported by several business credit reporting agencies.

Understanding how business credit reporting agencies work and what they assess can help your company make more informed financial decisions.  In this article, we will discuss the three major business credit reporting agencies, including how they work and why their reports matter to your business.

What Is a Business Credit Report?

A business credit report is a detailed document showcasing the financial health of an organization; it includes its payment history, outstanding debts, credit utilization, and public records such as bankruptcy or liens. These reports allow lenders, suppliers, and potential partners to evaluate the risk involved in doing business with a particular company.

Your business credit score is determined by factors such as:

• Payment history with creditors
• Length of credit history
• Credit utilisation ratio
• Public filings (like lawsuits, judgments, or liens)
• Industry risk
• Financial ratios from filed business statements

The stronger the business credit scores are, the more favorable the interest rates will be, the higher the loan amounts, and the better the payment terms will be with vendors.

Why Business Credit Reporting Agencies Matter

Business credit reporting agencies are major determinants of financial stability and creditworthiness for any firm. These agencies collect, analyze, and report information about the financial health of a business, thereby giving lenders and partners confidence in the decision-making process. Reports from such agencies are utilized in cases involving:

• Banks and financial institutions considering loan applications
• Suppliers and vendors in determining payment terms and extent limits
• Landlords while leasing property
• Due diligence by potential partners or investors

A poor business credit score results in limited access to capital and growth opportunities, whereas a good business credit score offers the opportunity for better financing options along with lower interest rates.

Nowadays, major business credit reporting agencies have become an important part in business financing and assessment of credit. Let’s have a look at the major credit reporting agencies.

1. DUN & BRADSTREET (D&B)

Dun & Bradstreet is one of the oldest and most respected business credit reporting agencies in the world. Since its founding in 1841, D&B has provided a wide range of financial data on millions of businesses worldwide. The company’s most recognized credit score is the D&B PAYDEX® Score, a measure of a business’s payment history on a scale of 0 to 100.

Key Features of D&B: 

• D-U-N-S® Number: Probably one of the most significant D&B identifiers, this is a unique nine-digit number that identifies your business in the D&B database. This number is required by many organizations to do business, especially government agencies.
• PAYDEX® Score: This score reflects your business’s capability of paying its debts on time. A PAYDEX score of 80 or above is generally regarded as very good.
• D&B Rating: This rating assesses an organization’s overall creditworthiness based on financial statements and other public records.

Business ownership, financial performance, and industry trends are other facets D&B reports on. Due to their global presence, it is natural for a firm seeking to establish business or expand into another country to research the matter at hand with D&B.

2. EXPERIAN BUSINESS

One of the major players in the world of personal credit reporting, Experian, has a very significant business credit reporting unit called Experian Business. In fact, Experian business reports provide extensive financial data on companies, from data on payment history and public records to credit utilization.

Key Features of Experian Business:

• Intelliscore Plus: Intelliscore Plus is one of the most popularly used credit scores by Experian, ranging from 1 to 100. It uses a mixture of payment history, credit utilization, and age of credit accounts for performing the scoring. A score above 76 depicts low risk.
• Business Credit Advantage: It is a subscription service that allows the business to track the changes in its credit report and sends alerts if there were changes in one’s credit profile.
• Credit utilization insights: Experian Business tracks how much credit a company is using relative to its available credit, which plays a significant role in determining creditworthiness.

One of the unique aspects of Experian is that they incorporate both public and private credit data in one report, thereby making their credit analyses more complete.

3. EQUIFAX BUSINESS

Like Experian, Equifax is better known for personal credit reporting. However, it also has significant footing within the world of business credit. Both lenders and suppliers use Equifax business credit reports when evaluating risk in extending credit to other businesses. Their reports are rounded out by detailed information concerning payment history, ownership, and performance. 

Key Features of Equifax Business:

• Equifax Business Credit Risk Score: This score runs from 101 to 992 and predicts the likelihood of a business becoming 90 days delinquent within the next 12 months. The higher the score, the lower the credit risk.
• Equifax Payment Index: This index illustrates how often a business pays its bills on time and gives a score that runs from 0 to 100.
• Business Failure Score: This score projects the likelihood of a business failing within a year. The lower the score, the higher the risk.

 Equifax also provides a Business Credit Report and Business Failure Risk Score, through which businesses can identify where they stand in terms of finances and make amends as required.

4. FICO SMALL BUSINESS SCORING SERVICE (SBSS)

While better known for its consumer credit scores, FICO also sells a Small Business Scoring Service, one of the most popular credit-scoring systems for small businesses in the United States. Most banks and other lenders in the country base their decision to grant credit to any business on FICO’s SBSS score.

Key Features of FICO SBSS:

• Scoring Range: The FICO SBSS scores range from 0 to 300; the higher the score, the better the creditworthiness. A strong score is any above 160.
• Focus on Small Businesses: The FICO SBSS focuses essentially on small businesses and merges both personal and business credit data to measure creditworthiness.
• Used by the SBA: The Small Business Administration (SBA)  utilizes SBSS scores to approve 7(a) loans, which makes it one of the most crucial credit scores for small businesses applying to get SBA loans.

FICO’s SBSS score helps lenders accelerate the time to make decisions about small business loans, thus reducing the time taken by businesses to access finance.

5. CREDITSAFE

CreditSafe is a world-leading and one of the fastest-growing business credit reporting agencies, highly popular in Europe and very strong in the U.S. CreditSafe offers real-time business data and insights that enable firms to make informed credit and risk management decisions.

Key Features of CreditSafe:

• Risk Score: CreditSafe gives a risk score ranging from 0 to 100, where higher scores mean lower credit risk.
• International Reach: CreditSafe offers access to credit reports from over 100 countries, proving the perfect fit for businesses dealing globally.
• Real-Time Data: CreditSafe offers financial data in real time, therefore ascertaining that in making credit decisions, businesses are reviewing data from the most current date.

It is known that usability and real-time data delivery are credited as some of the reasons why businesses like CreditSafe for timely and accurate credit information.

How to Choose the Right Business Credit Reporting Agency

Depending on specific industries, different agencies will be better suited for different company needs. Some of the major agencies, such as D&B and Experian, are certainly better suited for the largest businesses that have more complicated financial structures. In contrast, some agencies, such as CreditSafe, would be more fitting for a small business or an international company that deals with real-time data.

Here are a few factors to consider:

• Scope of Coverage:  If your business is international, the need for a credit reporting agency that can deliver on a global scale may include CreditSafe or Dun & Bradstreet.
• Depth of Information:  If you need in-depth credit reports with financial statements, payment histories and industry insights; D&B along with Experian can provide more thorough information.
• Ease of Use:  If ease of access to credit reports and real-time data is something important, then you have reason to consider CreditSafe.

Conclusion

Business credit reporting agencies are an integral part of the financial ecosystem, allowing lenders, suppliers, and partners to gauge risks in dealing with a certain company. Keeping a good credit score with these agencies is quite important in accessing loans, favorable payment terms, and entering into business partnerships.  Knowing the major companies in business credit reporting, such as Dun & Bradstreet, Experian, Equifax, FICO SBSS, and CreditSafe, will help you make wise choices to improve your company’s financial standing.