Home Building business credit What Business Credit Is and Why It Matters

What Business Credit Is and Why It Matters

A plain look at business credit for a small business owner: what it is, who checks it, and how to start building a file for free.

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For small business owners, the company's credit is a file of its own. Experian's page says a business credit score has no impact on a personal credit score, and vice versa.

What business credit is

Think of business credit as the company's own track record with bills and debt. It lives in files kept by business credit bureaus. It is apart from your personal credit file. Per Experian, your business score and your personal score do not move each other. Two files, two scores.

Each bureau keeps its own report on your company. Equifax says its report gives a quick view of a business. It shows the business's financial health. It also shows credit quality and risk indicators. Experian says its reports cover background and financials. They also cover scores, payment history, and public records.

Why it matters for growth

D&B says strong business credit scores help creditors decide whether to lend and on what terms. Equifax says good business credit can help a business. It can help them get better rates and terms from lenders.

The reach goes past banks. Equifax says good business credit can help a business. It can strengthen its contracts and bids. It shows the business is financially stable. D&B says possible clients can use business credit scores. They can judge a company's financial reputation. They do this before they partner with it. D&B calls good scores very important for small business growth and long-term success.

Who looks at your business credit

More people than you might think. Equifax says many groups review a business credit report. Banks and lenders do. So do insurance carriers and even customers.

So the file is not just for a loan application. A service provider may check it before working with the business. A possible customer may check it too. Both may look at the same record.

What goes into a business credit report

The details vary by bureau, but the pieces are similar. Experian says its reports include:

  • Business background information. It shows who owns the company. It also shows any parent companies and subsidiaries.
  • Company financial information. It helps assess the credit risk of extending terms.
  • Scores and risk signs that help a supplier judge whether a customer will pay
  • Banking, trade, and collection history. These show how an account paid its bills in the past.
  • Liens, judgments, and bankruptcies. These help you evaluate possible customers.

Equifax says its reports cover a company's background and how it performs. They also sum up its borrowing history and public records.

How to start building business credit

No file yet? D&B says a business owner can learn how to establish business credit. D&B says an owner can also learn how to gain control over their financial reputation.

D&B also issues the D-U-N-S Number. D&B calls it a unique number with nine digits. It is used only for businesses. It puts a business in the Dun & Bradstreet database. Others can confirm it is an active business.

Getting one is free, D&B says. There is no requirement for a company to have one. There is also no requirement to buy any product or service to get, use, or keep it. You can check whether your business already has one using D&B's lookup tool.

How to check and monitor your business credit

Equifax says ordering your own report helps you. It lets you correct mistakes. You can watch your borrowing history. It can also improve your access to funding.

Start by looking at your own file. Each bureau has its own way in, set out in our guide on how to check my business credit score. Want one bureau's report in detail? Read about the business credit report Experian offers.

Monitoring matters too. Equifax says watching your business credit file helps you spot errors and fraud. It can also help find accounts that were not approved.

All of this is something a business owner can do on their own.

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