What exactly is a small business credit report, and how can it affect your business? Read through and get some insights into this potentially useful tool.
A Mark of Trustworthiness
The first and primary use of a credit report is to establish a person’s trustworthiness in the context of business transactions. A business credit report is essentially the same thing, except for the fact that the subject is not one person, but a business.
A business can use a business credit report on another company to identify a few things that help make business less risky. Identifying whether a potential partner is likely to pay up is one such application.
Think of these reports as “reviews” for your business as far as payments are concerned. The score you get reflects the relative security there is when other businesses make deals with your business. And more importantly, it influences your likelihood to obtain credit (and at what interest rate) should you need to expand your business.
What Sorts of Info Goes Into It?
These reports contain information like credit obligations to suppliers and lenders, legal obligations on the local, county, and state level, as well as background information from public records, credit card companies and so on.
Also included in the calculations are the past experiences of people and businesses you have sent payments to, as well as other matters of payment by your company. Remember that these reports are meant to help small businesses mitigate risks from non-paying customers or bad investments.
Things That Can Make Your Score Worse
On the practical side of things, what are the actions that can cause your business credit score to drop?
First off, delinquent payments on loans and supplies will definitely affect your score in a negative manner. People like getting their money on time, because it relieves worry and leaves them free to pursue other lines of investment.
Any derogatory marks on your business will certainly find its way into your credit score. Had a suit filed against you? Violated fire safety standards? Problems with the labor unions? All these things and more will somehow affect your credit score.
It is essential to separate business credit and personal credit. In reality though, either can affect the other one. Many small businesses today use personal credit as the credit line for their business, but this is very risky, as mistakes on the personal level propagate into the business. As a best practice, ensure that your business credit and personal credit lines are distinct and separate.
Equifax’s small business credit reports can help you establish, improve and monitor your business credit score so you’ll get the funding and credit you need and when you need it. Get Equifax Business Credit Monitoring Now!
