Understanding The Three Major Business CREDIT REPORTING AGENCIES

Unlike your personal credit history, there isn’t the same degree of data consistency between your three major business-reporting bureaus. Quite simply, they don’t all look at the same information in the same way, so it’s easy to see why business credit can be so confusing. Of the big three, Dunn & Bradstreet are the only bureau that concentrates exclusively on business credit. And they focus mainly on how a business interacts with vendors and other suppliers. Which is why potential suppliers often take a look at your D&B reports before they provide your business trade credit.

Although you may have heard of the 100-point PAYDEX score, that’s only 1 of the five business credit files they produce. D&B looks at business-to-business data posted by suppliers, public record information, industry data, and other historical data to compile their credit and reliability data. Three of the five scores are predictive-based scores made to forecast how your business will perform over the next 12 months.

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1. Delinquency Predictor Score: This score was created to predict if a business is likely to pay their expenses promptly. 2. Financial Stress Score: This score is designed to predict the probability of a company will experience financial distress. 3. Supplier Evaluation Risk Rating: This ranking predicts the likelihood of a business might stop delivering its goods and services.

D&B predictive scores are designed to look into the future based upon past performance, industry data, trade references, and other information in your D&B profile. Because they are looking at the public record and even the SIC (Standard Industry Classification) rules, to forecast how your business will perform in the foreseeable future, it’s critical to make sure the info in your profile is accurate. A wrong SIC code for example, could negatively impact your ability to successfully obtain vendor credit or a small business loan. The other two D&B scores are what they classify as performance-based scores.

These scores represent a business’ previous performance over the last 24 months. 1. PAYDEX Score: This is actually the 100-point score most small business owners think of when they think of D&B. The bigger your rating the better. This rating is based upon how well you’ve paid your expenses and held your obligations to suppliers and suppliers that are accountable to D&B. Unfortunately, if you are current with suppliers who don’t are accountable to D&B, that given information won’t be included when determining your PADEX rating.

It’s important enough that you should encourage your present vendors who don’t report your credit history to D&B to take action. You might want to consider changing vendors to the people who do even. 2. D&B Rating: This ranking is based upon company financial statements and other open public information to indicate a company’s net worthy of and financial health.

Equifax transforms data collected by the Small Business Finance Exchange (SBFE) into a report. The SBFE comprises the largest small business lenders in America and where they report loan data, so the Equifax statement is a reflection of how small businesses make credit credit card and other loan payments.

Because this data is a direct reflection of how small businesses connect to large small business lenders, it is one of the bureaus banks use to judge your credit history. Just like the other business credit reporting agencies, they also gather trade credit information and data from the public record to judge the credit history of a business. The Equifax data source processes an incredible number of records every day and with few exceptions is up to date monthly to ensure accuracy. Experian collects credit information from suppliers and lenders.

They also take a look at the information available in the public record including legal filings from local, region, and state governments, as well as information from credit card companies, collection agencies, corporate, and business financial information, and other databases. Experian gathers a lot of loan company data also. They go through the amount of credit transactions, outstanding balances, payment habits, how much of your available credit you use, and the facts of any current liens, judgments, or bankruptcies. Experian’s business credit report could be considered the most balanced of the big three.

They collect both trade data and banking data to produce their report. Although some small businesses don’t use a lot of trade credit but rely heavily on the lender, others don’t gain access to capital through the bank but rely on conditions from their vendors to do business. Everybody else does both. Because of that, most lenders can look at the Experian rating. How long does information stay on my business credit file?