How to Analyze and Utilize an Experian Business Credit Report

Business credit reports are documents filled with information about a company’s financial details that help countless businesses and financial institutions make informed lending decisions every year.

Other information, such as the company’s structure, the owner’s financial background, etc., are also revealed in these reports. Different credit reporting agencies assign credit scores on different criteria. But the principle is the same: The better your credit report performance, the more creditworthy you are considered in the market.

Creditworthiness is a quality that is in demand in the current economic environment. Businesses realize that they cannot extend credit lines unless they are confident about the debtor’s financial standing. For instance, after the federal stimulus aid was rolled out to businesses that suffered during the pandemic, over 1,500 firms were caught committing fraud. They received $2 billion in aid by lying about their economic situations.

Businesses, vendors, suppliers, etc., cannot be trusted at face value. Any business that extends credit to a supplier or a customer without checking the debtor’s credit report is taking on a huge risk. On the other hand, business owners that get Experian business credit report de-risk their businesses by extending credit to entities that are “good for the money” and do not have major financial burdens looming over their heads. That is why analyzing credit reports is a must-have skill for any business person involved in extending or receiving credit.

What Is in a Business Credit Report?

Recently, a Wall Street Journal survey revealed that 25% of small business owners had mistakes in their business credit reports. These errors made them seem riskier. There is therefore an incentive for businesses to constantly update and improve their business credit reports and scores. Lenders, suppliers, customers, potential partners – everyone has the option to update the information that is presented in credit reports.

Typically, the reports from leading business credit bureaus like TransUnion, Experian, and Equifax contain proprietary scores that denote an entity’s risk profile and basic information, such as:

  • Company profile:Each business receives bureau-assigned numbers from different agencies. For instance, Experian gives Business Identification Numbers (BIN). These reports also contain Standard Industrial Classification (SIC) numbers denoting the business’ industrial background.
  • Public records:These include Uniform Commercial Code filings, bankruptcies, judgments, and liens.
  • Payment background:How much time does it take for the lender to repay loans? What is the business’ average “days beyond terms” (amount of additional time required to repay loans)? These questions are also addressed in the reports.
  • Basic information:Number of active business facilities, financial statements, balance sheets, and so forth.

How to Analyze Business Credit Reports

To decide whether or not a vendor or business partner is creditworthy, take these steps:

  • Make sure the company information is valid, not outdated. The North American Industry Classification System (NAICS) and SIC numbers must be correct.
  • Check the credit scores on different reports.
  • Double-check for red flags such as UCC filings, delinquent payments, tax liens, bankruptcy filings, and any other negative information.
  • Before extending credit, ask the lender about the problems in their reports.
  • Avoid lending money to businesses, vendors, suppliers, etc., who have been reported for fraud in the past.

Businesses should get credit reports from all the top business credit reporting agencies (TransUnion, Experian, Equifax, and Dun & Bradstreet), and draw their own conclusions about their lendee’s creditworthiness.

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