Business credit bureaus: What they are & how they work

If you own a business, you know how important it is to establish and maintain a strong business credit profile. Your business credit scores, generated by the major business credit bureaus, play a critical role in determining your access to financing, trade credit, and even potential partnerships. However, many business owners are unfamiliar with these bureaus and how they operate.

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In this article, we take an in-depth look at these business credit reporting agencies, how they collect information, and what you can do to ensure your business credit profile is in top shape.

Who are the business credit bureaus?

There are three main business credit bureaus:

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1. Dun & Bradstreet (D&B)

2. Experian 

3. Equifax

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Each bureau collects slightly different information and generates its own business credit reports and scores. Let's look at each one in more detail.

Dun & Bradstreet (D&B)

Dun & Bradstreet is the oldest and most well-known business credit bureau. Founded in 1841, D&B maintains credit files on over 500 million business records worldwide.

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The main business credit score generated by D&B is called the PAYDEX score. PAYDEX scores range from 0 to 100, with higher scores indicating a better payment history. Scores of 80 or above are considered great. 50-79 are considered fair to good while a score under 50 is regarded as subpar and indicates a past record of overdue payments or accounts in default. The PAYDEX mostly takes payment history into account amidst other factors such as number of trade experiences, credit utilization, and length of business credit history.

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To have a PAYDEX score, your business must have a D-U-N-S Number and at least two trade references that report payment activity to D&B. You can get a free D-U-N-S Number on D&B's website. Once you have a D-U-N-S Number, you should encourage any vendors or suppliers you work with to report your payments to D&B to help establish your credit profile.

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In addition to the PAYDEX, D&B generates several other scores and ratings, including the Delinquency Predictor Score, Failure Score, Cyber Risk Rating, ESG Ranking, and D&B Rating. These assess things like the likelihood of late payments or business failure over the next 12 months.

Equifax

Equifax is one of the major consumer credit bureaus that also offers business credit reporting services. One of the main Equifax business credit scores is called the Payment Index. Similar to the PAYDEX, it ranges from 1 to 100 with higher scores predicting a lower risk of late payments.

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Equifax also provides a credit risk score which assesses the likelihood of a company becoming severely delinquent on payments, and a business failure score that predicts the chance of a business failing through bankruptcy over the next 12 months. The credit risk score ranges from 101–992 with lower scores indicating higher risk, while the failure risk score runs from 1,000–1,880.

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To establish a credit file with Equifax, your business must be incorporated, have a business credit card or trade line that reports to Equifax, or have already applied for business credit in your company's name. 

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Equifax offers business credit reports through their website at a price of $99.95 per report. Alternatively, you can opt for a package of five credit checks for $399.95. Additionally, Equifax provides credit monitoring services at a monthly cost of $16.95.

Experian

Experian is another major consumer credit bureau that maintains business credit information. Experian's main business credit score is the Intelliscore Plus which ranges from 1 to 100. Scores of 76 or higher predict a low risk of late payments or default while 1 indicates the highest risk.

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Experian also provides various other scores and indicators of credit risk like the financial stability risk score which uses a scale of 1 to 5 to assess a company's risk of failure over the next 12 months, with 1 being the lowest risk and 5 the highest. 

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Experian provides a business credit score report package with prices starting at $39.95 for each report. In addition to their standard credit score report, Experian also offers a business credit advantage package at an annual cost of $189. This package includes access to Intelliscore Plus, credit summaries, trade payment details, supplementary analysis, and alerts.

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In addition to the scores provided by the three main business credit bureaus, there's also the FICO Small Business Scoring Service (SBSS) score. This score ranges from 0 to 300 and is used by many lenders, including the SBA, to evaluate loan applications. The FICO SBSS score considers data from your business credit reports as well as your personal credit report to provide a comprehensive assessment of your business's creditworthiness.

How does business credit reporting work?

The basic business credit reporting process works like this:

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1. You establish a credit file by either adding your business directly with the bureau or having a vendor or lender report information on your behalf. For a bureau like D&B, getting a D-U-N-S number is often the first step.  

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2. Whenever you have interactions that affect your business creditworthiness (like making or missing payments), the other party may report that activity to one or more bureau which updates your file accordingly. The more positive payment experiences reported, the better.

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3. When you or another party (like a lender or vendor) requests your business credit report, the bureau generates it based on all the information in your file. Your business credit scores are calculated based on this data.

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4. You can get a copy of your business credit report at any time to review what's being reported about your business. If you find any errors, you can file a dispute with the appropriate bureau.

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The goal is to establish your business as a separate entity from your personal credit and build a strong business credit profile over time. With excellent business credit, you may qualify for better rates and terms on loans, lines of credit, and trade credit with suppliers. Many companies also use business credit reports to evaluate risk when considering potential business partnerships.

What is an example of a business credit?

Here's an example to illustrate how business credit works:

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Let's say you own a catering company. You purchase supplies and ingredients from a restaurant supplier on a regular basis. The supplier agrees to extend you trade credit, allowing you to pay your bills within 30 days of each invoice. 

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The supplier reports your payment activity to Dun & Bradstreet, which establishes a trade credit account on your business credit report. If you consistently pay within the 30 day terms, this positive payment history will gradually boost your PAYDEX score (remember, the PAYDEX score majorly considers payment history). 

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As you continue working with the supplier and other vendors that report to the business credit bureaus, you establish several trade lines demonstrating a pattern of responsible credit management. You may also open a business credit card which gets reported to the bureaus as well.

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Now let's say you want to expand your business with a loan to purchase some new equipment. When you apply, the lender pulls your business credit report to assess your creditworthiness. They see several trade lines with a positive payment history and an excellent PAYDEX score in the 80—100 range. 

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This gives them confidence that your business has a track record of paying its debts on time. As a result, you may qualify for a larger loan amount with competitive rates and terms. The equipment loan, if handled responsibly, then becomes another positive account on your business credit report, further boosting your scores and expanding your future financing options.

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Building strong business credit takes time and diligence. But with the right strategies, you can proactively establish your business as a great "borrower" and open up valuable financing opportunities as you grow. The business credit bureaus provide an important way to document and share your business's credibility separate from your personal finances.

Where does business credit information come from?

Business credit bureaus gather information from a variety of sources to generate their reports and scores. The main sources include:

• Trade references: Vendors and suppliers your business works with can report your payment activity to the bureaus. This is why it's important to establish trade lines with companies that report to the bureaus.‍
• Business credit cards: If you have any business credit cards, your lender will likely report your activity to one or more business credit bureau.‍
• Public records: The bureaus collect public information like business registrations, licenses, and any legal filings (liens, bankruptcies, judgments) from local, county, and state government databases.
• ‍Company data: Basic facts about your business, like years in operation, SIC or NAICS code, number of employees, and annual sales, can come from information you supply directly to the bureaus or from data aggregators.
• ‍Collection agencies: If any debts are reported to collection agencies, this will likely appear on your business credit reports too.

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How long does information stay on your business credit report?

Each bureau has different policies for how long information remains on file. However, Experian clearly displays them online adhering to standard industry and government guidelines. The specific data retention periods are as follows:

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• Trade data: 36 months
• Bankruptcies: 9 years and 9 months
• Judgments: 6 years and 9 months
• Tax liens: 6 years and 9 months
• Uniform Commercial Code filings: 5 years
• Collections: 6 years and 9 months
• Bank, government and leasing data: 36 months

How accurate is your business credit report?  

In 2013, a Wall Street Journal survey found that 25% of small business owners who checked their business credit reports found errors. 

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Common mistakes can include:

• Accounts being reported as delinquent when payments were made on time
• Accounts listed that don't belong to your business
• Incorrect SIC or NAICS code classifications
• Closed accounts still being reported as open
• Incorrect annual sales figures or number of employees

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While the bureaus strive to provide accurate information, mistakes can happen. It's important to monitor your business credit reports regularly and dispute any errors you find directly with the appropriate bureau. 

How Ramp can help you build business credit

One of the smartest ways to establish business credit is with a corporate card that reports to the major bureaus–and that's exactly what Ramp offers. With Ramp, you can:

• Get a corporate card with no personal guarantee or credit check required. We evaluate your business on its own merit.
• Build your business credit. We report your on-time payments to bureaus, such as Experian, Equifax and Dun & Bradstreet, helping you establish a positive credit history.
• Manage your business spending with powerful expense management tools, spend controls, and real-time reporting all built into our platform.
• Automate your accounting and save time with seamless integrations with QuickBooks, Xero, NetSuite, Sage Intacct and more.

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With Ramp, you can access the capital you need to grow your business while building a strong business credit profile—all without impacting your personal credit. Customers also get to save an average of 5% on business expenses too. It's a win-win situation.

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Visit Ramp to learn more and get started.