Dun and Bradstreet Report
A main reason to manage business credit is that it is not protected like personal credit. Even though the Fair Credit Reporting Act allows you to view and dispute the inaccuracies in your personal credit reports, the act does not apply to business credit.
Since business credit reports are less transparent than those for individuals, business owners should be diligent in managing their business credit file regularly, since it is much harder to initiate disputes to remove inaccuracies.
In the current market it is building business credit that will allow you as a business to obtain financing and will often be the difference between a company’s continued operations and financial instability.
So what’s in a D&B® Credit Report?
Let’s break it down step by step:
1. Basic Company Information – This information is obtained when you apply for a DUNS Number as well as the information you supply when applying for credit with a DNB trade partner.
2. D&B D-U-N-S Number – The D&B D-U-N-S® Number is used by industries and organizations around the world as a global standard for business identification and tracking. It is the number used to pull your company’s credit report when applying for credit.
3. D&B Scores
a) PAYDEX® Score – D&B’s indicator of how a firm paid its bills over the past year, based on trade experiences reported to D&B by various vendors. The D&B PAYDEX Score ranges from 1 to 100, with higher scores indicating better payment performance. A score of 80 or higher is desired.
b) Commercial Credit Score – A score of 1 – 5, where a one (1) represents businesses that have the lowest probability of severe delinquency on payments, and a five (5) represents businesses with the highest probability of severe delinquency on payments.
c) Financial Stress Score – A score of 1 – 5, where a one (1) represents businesses that have the lowest probability of financial stress, and five (5) represents businesses with the highest probability of financial stress. Financial stress can be define as any of the following:
- Ceased operations following assignment or bankruptcy
- Ceased operations with loss to creditors
- Voluntarily withdrew from business operation leaving unpaid obligations
- Is in receivership, reorganization, or has made an arrangement for the benefit of creditors
4. D&B Ratings
a) Supplier Evaluation Risk Rating – Predicts the likelihood that a business will deliver goods as promised over the next 12 months. This score is created using business history, payment habits, and industry norms. Scores range from 1 through 9, with 1 indicating the lowest risk, and 9 indicating a high risk of not delivering goods as promised.
b) Credit Limit Recommendation – Provides lenders with two suggestions as to the amount of credit a business should receive:
- Conservative Limit- a dollar benchmark if your policy is to extend less credit to minimize risk
- Aggressive Limit- a dollar benchmark if your policy is to extend more credit with potentially more risk
- These recommendations are made based upon the size of business, industry, and likelihood of slow payments or financial distress.
- Recommended limits are useful when dealing with a new customer or prospect with which you do not have a previously established credit record.
c) D&B Rating
5. Trade References – A trade reference is the payment experience information provided by a supplier on its customer. Trade references are comprised of 7 base variables, which represent the credit-worthiness of the suppliers’ customers. The variables are: reporting date or as-of date, manner of payment, rolling 12-month high credit (highest amount of credit used), current total amount owing, current total past due, selling terms, and date of last sale.
6. Suits, Liens, and Bankruptcies
If you have not viewed your D&B business credit report make sure you order a complete business credit report so you can review your company’s complete file today.
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in the SBA Community, American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.