Top Three Bureaus
The top three credit bureaus used in business credit are Dun & Bradstreet, Business Experian, and Business Equifax. Ninety-nine percent of creditors will report to one of these three credit bureaus. The top credit bureau is Dun & Bradstreet, so we will discuss it first.
Dun & Bradstreet is the largest business credit bureau in America. This also means they hold the most clout with the creditors. Dun & Bradstreet (also called DNB, DUNS) set the standard for business credit scoring. It is the one credit profile you, as a business owner, must protect. Lesser reporting agencies often obtain their information from Dun & Bradstreet. Having a solid DUNS profile is critical to the success of your business.
The next largest credit bureau is Business Experian. Experian has both a personal credit division and a business credit division. Many banks use Business Experian, in addition to checking your Dun & Bradstreet credit profile. Essentially, the same scoring system is used by both.
To round out the top three, there is Business Equifax. Like Experian, Equifax has both a personal and business credit division. Since they are run independently from each other, you do not have to worry about your personal credit profile being cross-referenced with your business credit profile. The same holds true with Experian.
These three credit bureaus provide the benchmark of credit reporting to the creditors. Since the lesser reporting agencies often buy their information from them, concern yourself with these top three. In your corner, they can be a tremendous asset to your company. When contacting them, always try to remain business friendly, even if a mistake has been made on your credit profile. Screaming into the phone is more likely to get your account flagged than resolve your problem. Remember, they want accurate reporting as much as you do. It is the only way they can maintain their standing in the eyes of the creditors.
PAYDEX vs. FICO Scoring
You are probably familiar with the FICO scoring system used in personal credit. Your FICO (Fair Isaacs) score ranges from 450 – 850. In business credit, a different scoring system is used called your PAYDEX score. Your PAYDEX score ranges from 0 – 100.
An 80 PAYDEX score is equivalent to a 750 FICO score used in personal credit. As you are probably aware, a 750 – 850 FICO score is considered an “A” credit rating for an individual. Likewise, an 80 – 100
PAYDEX score is an “A” credit rating for a business or corporation. Most creditors use a minimum PAYDEX score of 75 to extend a line of credit to your company. Most banks prefer to see a PAYDEX score of 80 or higher to extend a business loan or business line of credit to your company.
Business vs. Personal Credit
There are two major differences between business and personal credit. With personal credit, if you make mistakes, you can still repair your credit. Even if you do nothing, negative comments will fall off your credit report in 7-10 years. Business credit does not work in the same way. There is no such thing as business credit repair. It only takes 1-2 negative entries into your business credit report to ruin your business credit forever under that company name. Business credit is actually easier to obtain than personal credit, but it is much less forgiving if you make mistakes.
The other major difference between business and personal credit is the amount of credit you can utilize from each creditor. For example, let’s say you have a personal MasterCard with a $5000 credit limit. You take your credit card to the mall and charge $2500 on your card, using 50% of the available credit. By doing so, you have dropped your FICO score by an average of 40 points, because you exceeded 35% of the issued amount of credit on that credit card. Again, business credit does not work in that manner. It is understood in business credit, that the business owner is going to fully use each line of credit obtained. Thus, if you have a business MasterCard with a $5000 credit limit, and you charge $4000 to your credit card using 80% of the available credit, you did not drop your PAYDEX score even one point. The ONLY thing that raises or lowers your PAYDEX score is your PAYMENT HISTORY! You simply cannot make late payments when it comes to business credit, and maintain your business credit score. Complete our 12 month full-service credit building program, and we can guarantee your company will have a minimum PAYDEX score of 80 or higher!
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