If your company already has, or needs to apply for, a DUNS number, you may know that the DUNS numbering system was developed and is maintained by a public company called Dun & Bradstreet. What is this company, and what else do they do?
Dun & Bradstreet is a public company listed on the New York Stock Exchange; their primary business is to provide information on businesses and corporations, primarily for use by lending institutions in an effort to determine creditworthiness. Information kept by D&B can also be used in business-to-business marketing efforts and for other purposes. D&B’s database has become a clearinghouse of information and a standard source; the company currently has information on more than 190 million companies worldwide.
Dun & Bradstreet can trace its history to July 20, 1841, when Lewis Tappan created the Mercantile Agency in New York City. This company was formed to fill a growing need — to provide, through a network of correspondents, reliable and objective information about companies, primarily credit information. As the 1800s wore on, control of the company passed from Tappan to Benjamin Douglass, and then to Robert Graham Dun, who in 1859 renamed the firm R.G. Dun & Company. Dun was able to expand the company nationwide and internationally.
Meanwhile, in 1849, John Bradstreet founded a rival company in Cincinnati; Bradstreet popularized the use of credit ratings and published the first book of commercial ratings. The rival companies were both successful, but the heated rivalry began to take its toll during the Great Depression; in 1933, the companies merged to form Dun & Bradstreet. The merger was successful largely because of the efforts of Dun’s CEO at the time, Arthur Whiteside, who began to emphasize the marketing of business “services” rather than “products.” Whiteside was able to lead the merged company out of the Depression and to introduce modern business practices.
D&B gathers its vast amount of information through public records, newspapers and other publications, trade references, telephone interviews, telecommunications service providers, and other sources. Company revenue is derived primarily from subscriptions, sales of individual business reports, and third-party licensing agreements. Various subsidiary companies provide additional revenue.
Apart from business reports used to make credit decisions, D&B also offers sales and marketing products such as its Market Identifier Database, providing marketing professionals with business data appropriate for both sales prospecting and customer relations management. D&B also assists with supply management, helping firms assess the performance of current or prospective suppliers to mitigate risk. Various other business services include helping companies monitor and improve their own credit ratings, ensuring compliance with government regulations, and other services.
Of course, Dun & Bradstreet is best known for maintaining the Data Universal Numbering System, or DUNS; this numbering system was introduced in 1963 to support the company’s credit reporting activities. According to the system, each business entity is assigned a unique nine-digit number; the numbers are random, the digits having no special significance. More than 100 million DUNS numbers have been assigned to companies around the world; the number has become such a standard that organizations such as the European Commission, the United Nations, and the United States government use DUNS numbers to keep track of business entities. DUNS numbers are recognized and often required by more than fifty industry and trade associations worldwide. Any entity making a grant application to the U.S. government is required to have a DUNS number, and many U.S. government agencies require vendors to have a DUNS number. It doesn’t cost a company anything to obtain a DUNS number, and the process can be done over the phone.
When any entity becomes a standard clearinghouse of information, as D&B has, there is the danger that the entity will be tempted to use its authority and influence in less than beneficial ways. Dun & Bradstreet has largely avoided temptation, maintaining its strong reputation; it remains a reliable and transparent private company. There are some complaints that the company has become too aggressive at pitching its products. Obtaining a DUNS number is free, but D&B phone representatives handling DUNS number requests have been known to make misleading sales pitches at the same time, sometimes informing customers (wrongly) that a paid service, such as a credit self-monitoring package ($449), is also required. One small business owner complained that the D&B representative informed him that his company’s credit score in D&B’s database was low, and that the only way to bring it up again was to purchase the self monitoring service. Such tactics, however, seem to be the exception rather than the rule, and you can always politely (or firmly!) tell an aggressive phone representative that you don’t require any paid services.]]>
If you operate any kind of business, you know how important your business credit report is. This document verifies your creditworthiness, so if you are applying for a loan or a line of credit for your business, the lending institution can determine whether your company is capable of managing the credit; a bad credit report can result in unfavorable credit terms. Or, a vendor might check your credit report to determine whether you are a reliable company to do business with.
Your report will contain information such as what type of business you are in, how long your company has established credit, what your payment history is and whether you have been delinquent with payments, what kinds of credit you have or have applied for, and the like. Even if your company has struggled with credit in the past, it’s important to establish good credit so that you can conduct business normally; it’s important to take steps to bring your credit report back up to par.
If these reports are so critical to your business, who actually creates the reports? Credit reports are compiled by private, for-profit companies called credit bureaus. These companies gather information from various sources, compile reports, and then sell the reports to interested parties such as lending institutions, department stores, insurance companies, and even employers and landlords. Because the information is sensitive and those purchasing reports must rely absolutely on their accuracy, a credit bureau stands on reputation, which takes decades to develop. As a result, there are only a very few credit bureaus that are commonly referred to.
There are three major credit bureaus that compile records on both individuals and businesses: Equifax, Experian, and TransUnion. You must ensure that your company’s information with these bureaus is accurate and up-to-date. You should also ensure that your individual credit records with these firms are accurate. Your individual credit score will determine loan terms for any personal loans you may wish to take out, for instance; and if you are a principal in your company, a lending institution checking out your company might check your individual score as well.
Experian was founded in 1980 and has operations in thirty-six countries; the company is headquartered in Dublin and has operational headquarters in Nottingham, England, and Costa Mesa, California. The company covers North America, most European countries, several Latin American countries, China, India, Japan, Malaysia, Australia, and South Africa. Experian maintains credit information on companies and individuals and sells credit reports; it also collects information about motor vehicles, insurance, and “lifestyle data” obtained via surveys. The company offers various other services to business, such as marketing services. Its databases maintain information on 215 million people in the United States alone, as well as on 450 million motor vehicles.
Equifax is a U.S. company, founded in 1899 and headquartered in Atlanta. Equifax maintains credit information on more than 400 million credit holders worldwide. Like Experian, Equifax is primarily known for maintaining credit records on individuals, but in recent years has expanded into commercial credit reports; currently, the company maintains over 24 million business records. Among other services, Equifax allows you to monitor other companies’ business activities, setting up alerts for when a business partner or key customer faces bankruptcy action or other significant events.
TransUnion is the third credit bureau that maintains records on individuals; like Experian and Equifax, TransUnion also provides business and corporate credit histories, and assists small businesses with marketing services, risk management, and other services. Founded in 1968, the company is located in Chicago and operates 250 offices in the United States and in twenty-four countries overseas.
Experian, Equifax, and TransUnion are primarily important to individual credit holders, and business owners and principals should ensure that their personal credit histories with these bureaus are up-to-date and accurate. A company that focuses exclusively on business credit reports rather than individual reports, however, is Dun & Bradstreet. This long-standing company, which has been in existence in one form or another since 1841, maintains information on more than 190 million companies worldwide. Sales of business credit reports to interested parties form the major part of D&B’s revenue, but like other credit bureaus, D&B provides various business marketing, customer search, and other services.
There are several other credit bureaus that compile reports on companies in the United States and worldwide. Credit.net is a division of InfoUSA that generates reports on more than 14 million businesses. Nearly half of these are on companies with four employees or fewer. Small companies in particular should ensure that the information compiled by Credit.net is accurate. Accurint Business works together with the Better Business Bureau, and can provide current reports from that long-standing organization. And Client Checker targets small businesses and freelancers, helping small businesses match up with each other in mutually beneficial ways. Client Checker generates business credit reports when users report whether clients have paid on time, late, or not at all.
With so many millions of company records to maintain, it’s easy to see how credit bureaus can sometimes make errors in compiling business credit reports. It’s important for every business to keep track of the information maintained by these bureaus, to ensure accuracy.]]>
If you are a business owner, or if you’re responsible for a company’s financial affairs, you know the importance of a strong credit rating from the business credit bureaus. These bureaus collect information about your company from a variety of sources and compile reports, which they then sell to interested parties. Most sales are to lending institutions, to whom you may have applied for a business loan. Other interested parties may include potential vendors, potential clients, and potential partners.
Business credit reports can contain a wealth of information — depending on how thorough the credit bureau was in compiling the report — and a lending institution or other party will be able to draw its own conclusions about your creditworthiness based on an assessment of this information. Many of the bureaus, however, also assign a “score” to a business, based that business’s ability to pay on time and other criteria. Like individual credit scores assigned by the three major consumer credit bureaus — Equifax, Esperian, and TransUnion — a business credit score fluctuates constantly, based on a company’s ongoing financial activities. Different business credit bureaus assign different kinds of scores, and lenders might pay more attention to some than to others, so it’s important to know something about these scores.
One of the most commonly cited business credit scores is the Paydex score, assigned to businesses by Dun & Bradstreet. Just as with an individual credit score assigned by a consumer bureau, a company’s Paydex score goes a long way toward determining whether that company can get a loan from a bank, and on what terms. However, individual credit scores are calculated based on a range of variables. In assigning a Paydex score, Dun & Bradstreet takes only one factor into account: whether that business makes its payments on time, and otherwise meets its creditors’ payment terms. Paydex scores are on a scale of 1 to 100; if your business pays all its bills on time, your score will be 80. If your score is higher than 80, then you’re paying the bills before they arrive, or during an early discount period established by your vendor. If you pay many bills fifteen days late, your company’s Paydex score will drop to 70; thirty days late, and the score will be around 50.
Because Paydex scores are widely referred to by lenders, it’s important to have an established score if you plan to apply for a loan. Get started four to six months before you apply for the loan. Dun & Bradstreet has various programs that help small businesses establish Paydex scores, but D&B charges hundreds of dollars to participate in these programs. Instead, apply for a DUNS number (a nine-digit business identification number) from D&B, free of charge, and use the number to establish a small line of credit with a company that reports to Dun & Bradstreet. Office supply companies might be one place to start. Make a few small orders and pay them off immediately, and then use your DUNS number to apply for a business line of credit with the same firm. Be sure that this firm routinely reports all such activity to Dun & Bradstreet; otherwise, your timely payments may not go toward establishing your Paydex score.
And once you have a good Paydex score, keep it active. Continue to use your credit, paying promptly of course. An inactive credit account may cause a Paydex score to slide.
Lenders typically like to see Paydex scores of 70 and above. They will not necessarily reject loan applications made by companies with Paydex scores of 60, for instance, but the lender will likely investigate the reason for the low score. This may hold up your loan, or may result in less favorable loan terms.
In addition to a Paydex score, Dun & Bradstreet assigns companies a “D&B Rating”: a short series of coded numbers and letters that reflect a company’s size (based on worth or equity) together with D&B’s overall assessment of that company’s creditworthiness, termed the “composite credit appraisal.” This assessment is gleaned from various information — payment history, financial information, public records, age of business, and the like. There is little you can do to influence your D&B rating — the size of your company is what it is. However, you should note your composite credit appraisal, which will be a number, 1 through 4, 1 being “high,” 2 being “good,” 3 being “fair,” and 4 being “limited.” If your number is unfavorable, you may want to check with Dun & Bradstreet to determine how they calculated it.
Apart from Dun & Bradstreet, Experian also assigns companies a score, called an “Intelliscore,” reflecting a company’s ability to pay creditors promptly. “Intelliscore Plus” is an upgraded version of this system, using statistical techniques and data to measure the risk that a company will default on a loan. A “Blended Intelliscore Plus” combines a company’s business data with the personal financial data of the business owner to produce an overall picture of credit risk. Intelliscore is based on a scale of 1 to 100, with 100 being the lowest risk and 0 being the highest risk.
Equifax, too, assigns scores to business performance; for instance, a company’s credit risk score predicts the likelihood that that company will be 90 days delinquent on a payment. Equifax’s business failure score predicts the likelihood of a company’s bankruptcy over the coming twelve months. And a “payment index” provides a dollar-weighted index of a company’s current and past payment performance. These numbers are all meaningful, and are available to lending institutions and others who are assessing your company’s creditworthiness. So it’s important to get this information from the bureaus and report any errors, omissions, or suspiciously low scores. But lenders pay most attention to D&B’s Paydex score; if you establish good credit by maintaining a high Paydex score, most likely the various scores assigned by other credit bureaus will then follow suit.]]>
If your company has fallen on hard times in recent years, you’re not alone. The recession of the late 2000s affected everyone, from small businesses to large corporations. Among other issues, your good credit standing with credit bureaus such as Dun & Bradstreet, Experian, and Equifax may have taken a hit. Lending institutions rely on business reports from these bureaus to determine the creditworthiness of companies seeking loans; and potential suppliers, clients, and partners may also purchase credit bureau reports to help them decide whether to do business with your company. So maintaining a good score is crucial for your company’s future prospects.
What can you do to repair your credit standing? First of all, obtain reports about your company from the major bureaus. Apart from those mentioned above, TransUnion, Cortera, ClientChecker, and a few others all may have information on your company. Make sure that the information in these reports is accurate and up-to-date, and fix any errors promptly. And if you are the business owner or a principal, then ensure that your personal credit score is calculated accurately as well. Individual credit reports in the United States (and many other countries worldwide) are compiled by Experian, Equifax, and TransUnion; contact all three bureaus, get copies of your individual credit reports, and report errors.
Make sure that any existing lines of credit that your company has access to remain open. Larger banks, themselves facing financial difficulties, have been canceling or capping lines of credit for individuals as well as small businesses. A closed credit card account or capped line of credit may be perceived as a negative event by a potential lender or partner. If you’ve had any closures, talk with your bank about reestablishing these lines of credit; banks are eager for business from reliable clients, and you may be able to work out an arrangement.
If your bank has informed you that it about to cancel your company credit card or line of credit, try to preempt this; you can offer to temporarily prepay against a credit card, or put up a certificate of deposit as security. Even if you will need this money for other purposes, at least you may be able to buy some time.
If you can, take out a loan, even a small one, even if you don’t need one. If you have delinquent loans on your business credit report, or a history of late payments, then taking out a new loan and making timely payments will boost your score. If a major bank won’t give you a loan, then explore microloan programs, which lend amounts as small as $500 to entrepreneurs and small businesses. Microloan programs have become widespread in the developing world, helping rural entrepreneurs establish themselves in small businesses; these programs have met with varying degrees of success. More recently, the idea has caught on the developed world. Grameen Bank and Accion USA are two organizations that provide microloans in the United States; the VanCity Credit Union has established a program of peer lending in Vancouver and elsewhere in Canada. And the Israeli Free Loan Association has lent over $100 million in the past twenty years to Israeli citizens.
Take a close look at your own receivables. Businesses that collect outstanding payments within 45 days are more attractive to lenders than businesses offering 120-day terms. You don’t want to lose your best customers by tightening up your collection policies, but examine your customer records and see where you might be able to speed up payments. Some of your customers may be having credit problems of their own; you can point out to these customers that, if they can show that they are paying off their invoices more promptly, their own credit scores will likely improve.
And if you are having trouble making payments to vendors, the most important thing is to communicate. You want to forestall a vendor from sending your account to a collection agency, or otherwise reporting your inability to pay. If you are fully communicative about your outstanding debt and propose renegotiating payment terms such that the amount can eventually be paid off in full, most vendors will be only too happy to at least consider your proposal. Debts that are delinquent, from accounts that have gone silent or disappeared, are rarely repaid in full, if they are paid at all. And a collection agency will keep a substantial percentage of any money it is able to extract from a delinquent account. Your vendor would much prefer to deal directly with you about your debt, especially if you’ve had good relations in the past.
Redo your business plan. Business plans are not just for start-ups; they can be living documents, reflecting how a company responds to changing circumstances. If you map out precisely how your company will see its way through a current crisis — how a new loan will be allocated, for instance — a lending institution will believe that you are committed to the future success of your business, not just looking for a quick way out of a financial crunch.
Financial difficulties can arise in any circumstances, for any number of reasons. However, it’s important to remember that there are steps you can take to improve your company’s credit standing, and restore the confidence of suppliers and other partners.]]>
If you operate a small business, one of the most important documents affecting the reputation of your company is your business credit report. These reports are compiled by a handful of credit bureaus: Dun & Bradstreet, Equifax, Experian, TransUnion, and a few others — and are used primarily by lending institutions to determine whether your company is creditworthy. Credit bureaus gather information from a variety of sources, including directly from the companies they are reporting on via phone interviews and other methods.
There are steps that you can take to ensure that your business credit is as favorable as possible. First of all, make sure that the information already on file at the credit bureaus is accurate and up-to-date. Check with the relevant bureaus — Dun & Bradstreet, Equifax, Experian, and others — and ask to see the information they have on your company. Often, a major credit bureau will have on-line tools at their website for this very purpose. You should do this on at least an annual basis, particularly if your company is planning to apply for a loan. Ensure that any information that is erroneous or incomplete is corrected as quickly as possible; the different bureaus may have different policies regarding how they make such corrections, and it’s important to be cooperative with them.
Beyond ensuring accuracy, there are various ways in which your company can operate to improve its credit score. First of all, pay on time. The experience that other companies have with your firm in getting payments from you is the most significant single part of your company’s credit report. Pay within the terms established between you and your vendor.
By the same token, if you are making substantial on-time payments to regular suppliers on a steady basis, ensure that your on-time performance is reflected in your credit report. Because timely payment is so important in your credit report, make sure that you are being duly rewarded for your good corporate behavior. Every single transaction that your company has made is not going to be reflected in the report, but make sure that the high-volume, high-value transactions are accurately reported.
If you are the business owner or a principal partner, then make sure your own personal credit rating is accurate and intact. Your personal consumer credit rating may be examined by potential corporate vendors, clients, creditors, or partners. If your personal finances are a mess, a potential creditor might project that your management of company finances will fare no better. The three principal consumer credit bureaus in the United States are Equifax, Experian, and TransUnion; get copies of your personal credit reports from all three bureaus, ensure that they are accurate, and take steps to improve your personal credit score as necessary. Bear in mind, however, that your personal credit reports are separate and distinct from your business credit report.
Your company should attempt to control debt financing. The company’s capital structure — how it uses debt or equity to finance operations — is an important determinant of creditworthiness. You should know your business, and you should determine the extent to which your major competitors finance their operations with debt. Your own corporate behavior should not be far off the mark in relation to your competitors. However, lenders may look at your debt structure in absolute as well as relative terms, and having a lot of debt in your balance sheet could prompt a lender to conclude that you are at risk of default. If you routinely carry debt, be prepared to compare your company’s performance with that of your competitors in this regard.
Be completely transparent and forthcoming with credit bureaus. Many credit managers at lending institutions prefer to see more information rather than less about a loan applicant. A credit report with a minimal amount of information may lead a credit manager to conclude that the company has something to conceal. Examine your company’s credit report and help the credit bureau fill in the gaps, thus creating a more robust report. If you know that a supplier or partner company frequently reports its positive experiences with your company to the credit bureaus, then ramp up your business with that supplier or partner.
On a regular basis, compare the financial performance of your company with that of your major competitors. Lenders and others examining your business credit report will likely be making the same comparisons, so ensure that your company comes out in a favorable light; determine what the benchmarks are in your industry, and try to be a step ahead of them.
Although business credit reports are compiled by third parties, it’s not beyond your control to direct what goes into them. If you focus on engaging in corporate behavior that reflects well in the credit reports, then your company’s scores should be high, and lenders and others with whom you wish to do business will look that much more favorably on your company.]]>
If you’re running a small business, it’s more likely than not that you’ll need a loan at some point, whether to make a major acquisition, expand operations, move your company forward in a new direction, purchase a subsidiary, or tide you through a rough period. Loans are standard in business, and building creditworthiness by taking out a loan and then keeping to the payment terms is one way of establishing your business.
However, applying for your first business loan can be a little intimidating; the commercial loan officer at your lending institution will require a lot of information, and it may not all reflect positively on your business. The important thing is, be completely forthright; don’t try to conceal or gloss over anything. The loan officer has various ways of finding out information about your company, and if he or she feels that you are trying to be deceptive, that’s a sure way to have your application rejected. If you have been delinquent with payments to vendors, for instance, it’s best to be precise and honest, and be ready to explain exactly why the irregularity occurred. If it was a matter of faulty procedure, or if you were just short on cash for a few months, have evidence showing that your situation has now improved.
Be prepared with documents, demonstrating both what the loan will be used for and why your company is a good credit risk. Most important is your business plan. Any start-up company needs a business plan, but if you’ve already been in business for a few years and need money for a specific purpose, then amend your existing business plan to incorporate your current situation. If you need the loan to make an acquisition or expand your operations, exactly how will the cash be used, and how long should it be before the expansion positively affects your bottom line? Be specific with numbers, and be prepared with best case/worst case scenarios. Your business plan should be a professional document; hire outside help to draft one for you if your expertise in this area is limited.
You should also prepare a cash flow projection. Do not confused this document with a cash flow statement; the latter is a record of cash movements that have occurred in the past. A loan officer will be more interested in a projection, as this anticipates how easily the loan will be paid off. Ideally, a cash flow projection should be a month-by-month accounting of anticipated cash movements into and out of your company for the following year.
Cash flow projections generally have three parts. First, enter estimated cash revenues, from sales for instance. Only enter revenues in cash for each month; don’t enter receivables. Second, enter cash disbursements, which you can copy over from your expense ledger. Finally, reconcile revenues and disbursements. This is just like balancing your checkbook: you begin with a carryover from the previous month, then add revenues and subtract disbursements, ending up with an adjusted cash flow balance that carries over to the next month.
If you are the business owner, you should also be prepared to show the loan officer a statement of your personal financial status: a list of your own assets and liabilities. Your personal financial status, of course, is entirely separate from the financial status of your company, but, particularly for very small companies, the loan officer will want to see as full a picture as possible. Very often, a business owner will use his or her own personal assets to start up a company, and if you can show that you still have personal assets in reserve that can be tapped in emergencies, that will make your application look more favorable.
Some lenders may wish to see business tax returns going back a few years. Tax returns can shed a different light on a company’s financial status. And a lender will want to see credit reports for both your business and, in many cases, yourself. Lending institutions can easily get these reports through the credit bureaus — Dun & Bradstreet, Experian, Equifax, and others for business credit reports; Experian, Equifax, and TransUnion for individual credit reports. However, you should check all of these reports thoroughly beforehand to ensure that they are correct and up-to-date. Get any errors corrected. If any errors remain in your credit report while it is being examined by a loan officer, have documentation showing why the report is in error, and that you have taken steps to have the report amended.
Finally, be ready to “sell” your idea — the reason you need the cash — when you are interviewed by the loan officer. Be ready to offer collateral — a tangible asset such as equipment, property, a vehicle — that can be sold for cash in the event of nonpayment. Be prepared to risk your personal wealth toward the venture; as pointed out above, bring a statement of your personal assets and liabilities. You are, after all, asking the bank to risk its money, so you should be willing to risk your own as collateral. And be prepared to sell yourself. The success of any business venture depends on the expertise of the professionals who are directing the effort. Be ready to talk about the details of your business, and how your own experience and expertise are the driving force behind your company’s success. Don’t boast or make exaggerated claims, but project confidence that you are the right person to make it work.
With the right documents, and the right attitude, securing a business loan can be easier than you think.]]>
If you operate a small company, or if you’re in charge of financial operations for a larger company, you know how important the business credit bureaus are. These bureaus — Dun & Bradstreet, Experian, Equifax, and a few others — maintain data on your company, along with millions of others worldwide, that is then used by lending institutions to determine your company’s creditworthiness. Business credit reports can also be purchased by potential suppliers, clients, partners, and others who will use the reports to decide whether it’s advisable doing business with your company.
Given the importance of these reports, how do the bureaus compile their information? Because these reports are used so widely by lending agencies and others, their reliability is of primary importance, not only to lending institutions making individual decisions but to the integrity of the credit system worldwide. So the bureaus, generally longstanding publicly held companies, must use rigorous procedures to ensure the reliability of their reporting as well as their own reputations.
The first place that credit bureaus look for information is from the companies themselves. Dun & Bradstreet, for instance, conducts telephone interviews with principals at companies, either in compiling new reports or in updating existing ones. It’s important to be transparent and forthcoming during these interviews. If you have favorable financial information, be sure to share it; the bureau will usually find this information through other means if necessary, so by being completely open at least with good news about your company, you can ensure that this information is reflected in their reports. You can share information over the phone, or submit financial statements to D&B.
There have been some complaints that Dun & Bradstreet has become overly aggressive in marketing company-oriented products during these phone interviews, or during call-in requests for a DUNS number. Some interviewers have even been accused of suggesting that a company’s credit rating can be improved by purchasing a credit monitoring service from D&B. There is no obligation for you to purchase any service or product from a credit bureau to ensure a fair and accurate report, and if you believe an interviewer is “crossing the line,” then ask to speak with a supervisor; or, get the name of the interviewer, end the conversation, and immediately contact D&B independently.
Credit bureaus use various other sources of information to compile reports. State and county courts and business bureaus maintain records of incorporation filings and business registrations; this public information is easily accessible, and can be used to verify information obtained elsewhere.
Corporate financial reports for U.S. publicly listed companies — i.e., companies that sell stock — are all filed with the Securities and Exchange Commission (SEC), and these reports can be examined by the credit bureaus or anyone else who is interested. Usually, a public company will include a number of financial statements in their annual reports to stockholders. It can be more difficult gaining access to privately held companies’ financials, since there are no filing requirements with the SEC. Some websites serve as clearinghouses for company information (though the information at these sites can be spotty), and some private companies post their financials on their own websites. If you represent a private company and believe that your financials put you in a favorable light, it’s usually in your best interest to volunteer this information to the major credit bureaus.
Some of the most critical information in your business credit reports comes from companies that do business with you — whether payment data from suppliers and creditors, banking and loan data from lending institutions, or general information from partners, clients, and others. Your creditors may not be as meticulous as you are in keeping records current, so it’s critical for you to examine your business credit reports on a regular basis, to ensure that they are accurate and up-to-date. If there are errors, get them fixed as quickly as possible. And if you have had problems keeping current with payments with one or more creditors, and these irregularities reflect badly in your credit report, the major credit bureaus can help you with strategies for improving your report.
If you have done business with the U.S. Federal Government — whether contracts, grants, or loans — these records are all available through the involved federal agency. Credit bureaus can also sift through public records at local courts, such as bankruptcy filings and records of suits, liens, and judgments. Universal Commercial Code (UCC) filings are also in the public record, and can include documents such as financing statements, federal tax liens, security instruments, and other filings.
Credit bureaus compile information on millions of companies, and their resources are of course limited, but plenty of company information can be gleaned by Internet data mining, from the trade press and other reporting, and in various print directories. There are any number of good reasons why you would want your company to project a favorable corporate image, and making sure that the credit bureaus can find only positive reports about your company online and in the press is one of them. If called for, consider hiring a public relations firm to upgrade your corporate image.
Given all the information that’s likely available about your company, whether you are publicly listed or not, credit bureaus may not have the time or resources to sort out any irregularities or ambiguities. Be sure to access their information on your company on a regular basis, and fix any errors. The most reliable information about your company is what you yourself can provide.]]>
If you own a small business, you already know how important it is to maintain good credit standing for your company. Business creditworthiness is measured in large part by reports issued by credit bureaus such as Dun & Bradstreet, Experian, and others; lending institutions and others use these reports to gauge how risky it might be doing business with your firm, whether lending you money, extending credit, purchasing goods or services, or engaging in some other transaction. However, if your company does not have longstanding credit or is new to market, lending institutions in particular might examine the personal credit report of the business owner, or other partners or principals in the company. If a company’s principals can’t keep their personal finances in order, that does not bode well for how their company’s finances may fare over time, at least in the eyes of a potential lender.
For this reason, it’s important to keep your personal credit history in good order too. In the United States, there are three national credit bureaus that collect personal financial data and compile reports: Experian, Equifax, and TransUnion. All three companies operate in similar fashion; Experian and Equifax have extensive business credit report divisions as well. And all three process the data they collect, generating the all-important FICO score.
FICO stands for Fair Isaac Company, which was formed in 1956 by the engineer Bill Fair and the mathematician Earl Isaac. The company devised a credit scoring system, which it eventually sold to the three major U.S. credit bureaus as well as bureaus abroad. Each of the credit bureaus assigned its own name to the scoring system (Experian, “Fair Isaac Risk Model”; Equifax, “Beacon”; and TransUnion, “Empirica”), but the score is still universally known as a FICO score.
A FICO score can range from 300 to 850; the higher the number, the better the creditworthiness. The exact formula is confidential, but various factors go into the calculation, as follows: 35 percent, payment history (whether you have a history of late payments); 30 percent, credit utilization (the ratio of revolving debt to total available revolving credit — a lower ratio is better); 15 percent, length of credit history (the longer, the better); 10 percent, types of credit used (using various types of credit is a positive); and 10 percent, recent credit inquiries (which, if excessive, can hurt your score).
It should be pointed out that Fair Isaac does not calculate individual scores; the three credit bureaus do that. And because the data collected by the three bureaus can differ, the scores generated by each will differ as well. If you are monitoring your FICO score (and you should, on at least an annual basis), you must get your score from each of the three bureaus and ensure that each one is accurate and up-to-date. If any of the three scores is far off from the other two, there is probably an error or oversight.
Lending institutions can interpret FICO scores however they wish; the score is a universal guideline, not a binding measurement. Because a FICO score is a measure of risk — how risky it would be loaning money to the individual owning the score — interest rates on loans will be higher for people with lower scores. For instance, an individual with a FICO score of 775 may qualify for a personal loan at 4.25 percent, whereas an individual with a score of only 625 may be offered only 5.85 percent. Over the course of a long-term loan, a bad FICO score can cost you a lot of money in interest payments.
With respect to a small business, lenders will often examine both a Dun & Bradstreet business credit report (including the company’s Paydex score, which calibrates how closely the firm adheres to payment terms on outstanding invoices), and the business owner’s FICO score from one of the three credit bureaus. Most commercial lenders like to see FICO scores of 650 or 700 and above, although commercial lenders consider dozens of variables. A high FICO score will not necessarily qualify you for a loan, just as a low FICO score will not automatically disqualify you.
There is much that you can do, as an individual, to improve your FICO score. Most importantly, pay your bills on time. Reduce outstanding debt as much as possible. Keep outstanding credit card debt at less than 30 percent of your credit limit. It’s not necessarily bad to have several credit cards with outstanding balances, but keep the balances low and manageable, continuing to use the cards nonextravagantly. And try to keep the number of credit inquiries at a minimum. Each time you apply for credit, the lender will check your report, and this access is monitored. The more inquiries into your credit, the lower your score will be.
Check your credit reports at each of the three bureaus at least annually. Each of the bureaus is required by law to provide you with your full credit report free of charge once a year, so you can check your FICO score every four months, alternating among the three bureaus. If you see a major error in one report, you may wish to purchase reports from the other two bureaus immediately thereafter to ensure that all three are corrected as necessary. And bear in mind, of course, that your three FICO scores at each of the three agencies will differ, hopefully just slightly.
If you maintain a good FICO score, and strong personal creditworthiness, you will be doing your business a big favor.]]>
There are many reasons why you might want to get a business credit report for a company. If you own or work for a lending institution, then examining business credit reports of companies that come to you for a loan is an everyday part of your work. But apart from this, if you are a small business owner, you might want to verify the creditworthiness of any other company you are considering doing business with, whether a supplier, a customer, or a potential partner. Before extending credit terms to a new customer, you might want to check their credit history. Even if you are simply a consumer rather than a business owner, you might consider checking the credit histories of contractors who are bidding on remodeling jobs in your home, for instance, or service providers with whom you might enter into long-term agreements.
There are several credit bureaus in the United States and overseas that compile business credit reports; depending on your needs, you can rely on a single report from an established firm, or purchase several reports and compare them. If verifying the creditworthiness of companies is a major part of your business, you can purchase various packages from the credit bureaus, giving you access to credit data on an ongoing basis.
The most widely cited business credit bureau is Dun & Bradstreet; D&B offers a variety of reports that are updated constantly. You can visit their website, type in the name of the company you are interested in, and then purchase the report you need. The simplest is the “Credit Evaluator Plus”: a summary report that includes a company’s payment history (with comparisons with industry benchmarks), credit limit recommendations, legal filings, and more. Also included is the D&B “Paydex Score,” a widely referred to score that reflects a company’s ability to pay its creditors on time. The Credit Evaluator Plus report costs $59.99, per company, for six months of access.
D&B also sells more comprehensive reports — a Business Information Report (at $119) and Comprehensive Insight Plus Report ($149) — that are more in-depth. These reports are designed to help you assess the risk of doing business with a company, particularly with regard to extending credit terms. Dun & Bradstreet offers a variety of additional, more comprehensive business analysis tools, some of which may cost hundreds of dollars. D&B’s website provides sample reports for most of their products, as well as charts comparing the features of various reports. If you believe you may be doing a considerable amount of business with Dun & Bradstreet, call them and ask about comprehensive packages.
Experian and Equifax are primarily known for monitoring consumer credit, compiling credit reports for millions of individuals in the United States and overseas and calculating FICO scores (the all-important “credit ratings”) for individuals. These companies also monitor businesses, and produce business credit reports that can be purchased at their websites. BizVerify, Experian’s most basic business report, costs only $8.95; CreditScore and ProfilePlus, at $29.95 and $49.95 respectively, offer progressively more information. However, these reports are sold as static documents; as at Dun & Bradstreet, Experian updates its credit reports on a constant basis. Experian’s Business Credit Advantage service allows you to subscribe to a company’s credit report for $14.95 a month, or $99 annually. If you anticipate doing substantial business with a particular company, an annual Experian subscription may be your best deal.
Equifax, likewise, sells a variety of business reports online. A basic business report on single company costs $99.95; a package of five reports on five companies costs $399.95, saving you $100. And business monitoring is $19.95 a month. Sample reports are available online.
Some other credit bureaus compile information on businesses and sell reports. Credit.net, Accurint Business, and ClientChecker all have information on millions of companies and sell reports online. It’s unlikely, however, that you’ll need to be so thorough. Pick one credit bureau whose reporting format you like, and work out an arrangement with them. Using the information compiled by these bureaus can help you choose the right suppliers, customers, and business partners, possibly saving you a great deal of money over the long term.]]>