What is a Business Credit Report?

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Like a personal credit score, a business credit report gives lenders and suppliers an idea of how trustworthy a company is. The scores typically range from 1 to 100 and lenders, like banks, and suppliers can use this to decide whether or not to extend credit, to determine interest rates on loans, and other credit factors.

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Different bureaus have different methods of calculating scores and interpreting factors, but in general, a score over 75 indicates good credit. A lender working with a business with a high score has relatively low risk when extending credit because it means they generally pay back their debts as they come due.

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A score of 20 or below, on the other hand, indicates that a business takes more than 120 days to make payments or has a history of missing payments when they are due. This indicates a high risk to lenders and may lead them to deny loans or offer them only with very high-interest rates.

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There are a wide variety of factors that are taken into consideration when determining a business credit score including payment history, length of credit history, and the credit utilization ratio. Other information provided on the report includes the number of employees, total sales, business registration details, and records of any previous liens or judgments. 

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Payment history is perhaps one of the largest factors when calculating a credit score. Missing payments or having a history of being unable to pay debts will drastically decrease your score and raise red flags to potential lenders or suppliers.

The credit utilization ratio is another vital factor. A high credit utilization ratio could indicate that a business is relying too heavily on debt to finance its operations and this could have an impact on their ability to repay loans in the future.

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Importance of a Business Credit Report

 

Since a business credit score is a basis for lenders to determine credit eligibility, loan rates, and other financial opportunities, it is very important to maintain a good score and check the credit report regularly. It’s also highly recommended that you get a business credit report on your buyers and suppliers.

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Unlike a personal credit report that can only be accessed by that individual or with his or her consent, a business credit report is available to anyone that is willing to pay for it. This means that suppliers and vendors can access all of this information and use it to determine lending and payment terms without first asking the company. So, getting a credit report on your buyers and supplies is critical to ensure you’re doing good business. Although it’s an extra expense to obtain a credit report on your buyers and suppliers, it could save you an even pricer mistake if you decide to buy or sell to a company that you don’t know well enough. 

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Businesses should review their buyers and suppliers credit reports on a regular basis to ensure that everything listed is accurate and complete. You want to know that they maintain strong scores so that you can have peace of mind while doing business. Contact us to get a business credit report on your buyers and suppliers today.

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