Understanding Business Credit Bureaus and Their Data
The three business credit bureaus are D&B, Experian, and Equifax. Of course Experian and Equifax are two of the three personal credit bureaus as well.
The three personal credit bureaus have very similar data sets because they have mostly the same creditors feeding them information. While there is crossover between the various data sets that the business credit bureaus hold, you will likely find a huge variation from bureau to bureau in the data they have on your business.
Equifax is partnered with the Small Business Finance Exchange (SBFE), a non-profit member owned organization owned by banks. Most banks report their business loan data to the SBFE, whether term loans, SBA loans, business credit cards, or lines of credit. Equifax provides the platform that turns the data into business credit reports with risk scores. Equifax does have some trade credit data and public records data, but it doesn’t seem to be as thorough as what D&B has.
D&B has a robust amount of trade credit, vendor credit, and other types of business-to-business credit data. They also have pretty thorough public records data. They don’t seem to have very much bank loan data like Equifax.
Experian kind of sits in the middle in the sense that they have lots of bank data, lots of trade credit data, and they also have public record data. Their report is a little more balanced considering some industries tend to use mostly bank loans for financing, others use mostly trade credit, and the rest use both.
Each bureau uses their own risk-scoring model. There is no third party scoring platform like FICO (formerly known as Fair Isaac Corp) set as the standard for the business credit bureaus to use. Experian and D&B both have a score range of between 0-100, but their scoring algorithms are different.
As a business owner it’s important that you monitor your business credit with each of the three business credit bureaus. Failing to do so can cause you a lot of misery when it comes time to look for financing or otherwise use your business’ credit.
Aside from seeking financing, lacking a good D&B score can prevent you from doing business with many municipalities, the federal government, and large companies.
Additionally, without good business credit at all three bureaus, the likelihood is that you will never get away from using your personal credit as the primary credit driver of your business needs.
For an example of the type of misery you can encounter from an inaccurate or incomplete business credit report, see this previous post. //www.lendio.com/blog/learned-equifax-business-credit-punched-face/