How Business Credit Actually Gets Reported

While most people know a little bit about personal credit, very few understand anything about business credit. 

Every day, I see countless people spreading false information about things like what lenders are looking for in underwriting, how to improve your business credit profile, and how creditors report it. 

The latter is what we’re going to break down in this article. 

If you want to leverage credit to operate and scale your business, you need to understand how your business credit gets reported. That information allows you to build a stronger profile, get approved for a higher credit limit, and access the capital you need. 

Credit reporting entities

There are two elements at play here—your personal credit profile and your business credit profile, and both matter.

Your personal credit profile is how lenders determine your ability to repay a debt, so even though you’re applying for business credit, they will evaluate your personal profile first. It’s also important to note that virtually all business credit will require a personal guarantee, but your business credit will not report on your personal profile unless you default.

This is why it’s critical to have a clean personal credit profile with all three bureaus—a perfect payment history, less than 35% utilization, and a high score.

Then there’s your business credit profile, which matters, but not quite as much as your personal credit profile.

Experian and Dun & Bradstreet are the two most common business credit reporting agencies, and frankly, they’re the only ones you really need to worry about.

D&B was the first, with Experian being a relatively newer player in this industry, but both offer comprehensive business credit profiles. Some lenders may only use one or the other, while some may use both, so either way, both are important, just like how Equifax, Transunion, and Experian all matter for personal credit.

So it’s important to pull both your personal and business credit profiles, and make sure both are accurate. And this isn’t just when you’re applying—it’s critical to keep tabs on both profiles along the way to make sure your account information and payment history is being reported accurately. There are two reasons for this.

The first is that inaccurate reporting could cause your credit limits to be reduced and could even result in credit being pulled entirely.

The second is that it enables you to fix problems as they come up, before it becomes a major issue. A situation you never want to find yourself in is having your business grind to a halt because you’ve suddenly lost access to the essential capital you need to keep it running.

I recommend pulling your reports at least each quarter to keep tabs on what’s being reported.

See Original Article Here: How Business Credit Actually Gets Reported