Business Credit Reports Demystified

Businesses rely on credit to succeed. And yet, business credit can be an intimidating and confusing area. Your business is taking hold; you’ve found ways to grow your market, and you want to jump on the opportunities to expand by partnering with other businesses. Perhaps that means you want to take out a small business loan to acquire additional inventory to keep up with increasing demands. Or, perhaps you want to partner with a company you think will excel at managing your supply chain so that you can spend more time focusing on the areas in which your business thrives.

Business credit reports can help you identify your own business’ stability in the eyes of others who may want to partner with you, just as it provides you the ability to get a deeper look into the track records of business partners you choose to rely on. Here’s a guide that will help you demystify business credit reports, so that you can feel confident in knowing how to improve your business’ standing and make sure the businesses you partner with are solid too.

Check your credit reports.

Did you know that in an average two –year period, only 33% of small business owners view their own business’ credit reports? And yet, a low credit score can quickly sink your business. Low scores raise bright red flags. Just as you would hesitate to partner with another business with low scores, others will steer clear of your business if your scores are problematic.

Check your business’s credit reports so that you can know when problems arise and address them before they lower your business’ overall credit profile.

Credit Scores

Personal credit scores are confusing—who decided that the scale should span from 300 to 850? Fortunately, business credit scores are simpler. A business credit score ranges from 0 to 100. High scores are better and mean lower risk.

If you are looking to strengthen or build your business’ credit profile, try to get your business’ score above 75.  Likewise, if you are looking for businesses to partner with, look for ones with scores north of 75.

Payment History

Just like with personal credit, a business’ payment history affects its credit risk rating. One of the biggest factors in assessing credit worthiness is by examining the business’ payment history. Are payments being made on time? Are payments being made at the minimum amount or are debts being paid down faster? Slow repayment can indicate slow revenue and higher risk, while faster repayment can indicate growth and lower risk.

If you are trying to improve your business’ credit score, be sure to make payments on time, and where possible, pay more than the minimum payment. These practices demonstrate reliability and trustworthiness, and will improve your customers’ confidence.

Company Profile

A business credit report provides a company profile including age, industry, employment base, sales, prominent executives, and parent or subsidiary businesses. Older companies are typically more stable and have documented history that shows the company’s borrowing and spending habits. More recent businesses might also be safe, but you may have to dig a little deeper and analyze their credit reports a little more closely to determine that.

If you are trying to boost your business’ credit profile, use your credit reports to inform you on how you are doing in setting a consistent and positive pattern in credit-based borrowing and spending.

Filings and Legal Issues

There are usually two kinds of filings on a business credit report. One includes legal filings such as lawsuits, liens, or bankruptcies. These latter two can significantly increase risk. Lawsuits may or may not indicate credit risk, depending on the nature and pattern of lawsuits for a company. The other kind of filings are UCC (Uniform Commercial Code) filings. UCC filings can be used to interpret how a business provides collateral, or security, for the credit being provided.

About the Author
The author of this article is Nicole Johnson, a credit editor and expert at


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