If you’ve ever taken out a loan or a credit card on behalf of your small business, your company probably has a credit history similar to that of an individual borrower. And, just like in your personal life, a lot is riding on making sure that your business’s credit file looks good and that its credit score is high.
Here are some questions — and answers — about business credit files.
Why should I closely monitor my business credit file?
According to the SBA, there are four reasons:
- The higher your business credit score, the more likely you are to get a loan with favorable terms.
- Vendors may offer you better payment terms: Instead of giving you 15 days to pay, they may give you 30 or more.
- If you sell to others, you can check their credit files. If you know how to evaluate your own, you will know how to evaluate theirs.
- You can protect your business from identity theft and the negative effects of inaccurate information.
Is there a company that maintains my business credit file?
Yes. Although companies like Experian and Equifax keep credit files on businesses, the most widely used commercial service is Dun & Bradstreet. If you own a new business, it probably doesn’t yet have a D&B file. However, if you run an established company with a small-business credit card, a bank loan, or anything else related to credit activity, it likely has a file.
How do I find out whether I have a business credit file?
Go to D&B’s website and do a search for your business. If you have a business credit file, it will appear in the results. If you do not, you should register for a D-U-N-S Number.
What is a D-U-N-S Number, and why do I need one?
D-U-N-S stands for “Data Universal Numbering System.” Once you have a D-U-N-S Number, you have a credit file with D&B.
According to D&B’s website, government, organizations, financial institutions, and trade associations may require you to get a D-U-N-S Number before doing business with them. You can apply for free (or pay a fee for an expedited number).
Does my business D&B credit file work just like my credit report?
No. When it comes to your personal credit file, you have very little say about its contents: You can file disputes and have inaccurate information removed, but that’s about it. Your commercial credit file is different: You can not only dispute inaccurate information, but also submit information to be included in your file. (D&B will verify this information before adding it.) To do this, join the D&B Credit Builder program.
What’s a Paydex score?
Paydex is your business’s credit score from D&B. It ranks your company on a scale of zero to 100, which essentially rates your “credit worthiness”: Zero to 49 indicates a high risk for late payment, 50 to 79 indicates a moderate risk, and 80 to 100 indicates a low risk.
How do I raise my Paydex score?
Pay your bills on time. Keep your business activities separate from your personal charges, and use a small-business credit card to pay for routine business-related purchases. If you pay for something business-related with your personal card, you will not receive D&B credit.
Do business with larger vendors that likely report to D&B. If you want to know whether a business reports to D&B, speak to its credit department (if it has one).