When applying for credit with a lending institution, a supplier or vendor, they are likely going to pull your credit report. Your company's Equifax business credit report is an indicator of how well you manage your money, what kind of debt you've accumulated, and it also provides them with a picture of your overall creditworthiness.
In obtaining a copy of the Equifax credit report, you can spot any potential problems and thus have some time and information to address these problem areas.
In this article, we discuss what you should look for in your Equifax business credit report and also give you a better understanding of how such scores impact your small business.
The Primary Components of Your Equifax Report
1. Company Profile: This simply includes general information regarding your company name and contact info.
2. Summary of Your Credit: This portion of the report shows where you stand financially as well as listing out past and current accounts you have with creditors/suppliers.
3. Public Records: Any judgments or liens, as well as official registration information, will be found in this section.
4. Payment Index: This is comprised of a chart which graphs your annual payment history in comparison to your industry standard.
5. Additional Company Information: This could include any other information key to your company not listed in the profile section.
6. Credit Risk Score: Based upon payment history and current standing, a score is generated which determines how likely you will be to default on a payment.
7. Business Failure Score: With this score, they estimate how likely you are to close your doors and/or go bankrupt in the coming year.
Basically, the report is read as a detailed breakdown of your company's financial history and forecasted future financial performance. This way those who are considering extending you credit, can be better informed before making such a decision.
Those lenders and vendors who are thinking of doing business with you, almost always request such a report prior to signing a deal as they want to know your creditworthiness beforehand.
Remember, this is solely based upon your company's financials—it has nothing to do with your personal credit history. In fact, your personal credit report will probably look vastly different from your Equifax business report.
Generating Your Equifax Business Credit Report
Equifax utilizes a number of sources to put together the information that comprises your report. Between government sources as well as various third-party reports, they are able to gather enough data to construct a comprehensive report on your business—information is then manually verified.
In terms of the resulting score, obviously the higher the better. As mentioned above, there are two components to the score itself—or rather two scores—of which you need to be aware. The Business Failure score and then there is the general credit score which indicates how much of a credit risk you would be to a potential lender.
The credit score range is set between 101 – 992. If in fact there is a bankruptcy in the history of your company, the score will report as 0. They will also provide reason codes justifying the score noted.
The Business Failure Risk Score falls between 1,000 – 8,000, and again, with a bankruptcy in your past, it will show up as a 0.
Obtaining Your Equifax Credit Report
In this digital day and age getting a copy of your business credit report is rather simple. You do have to pay a fee to Equifax, and then every time you view the report thereafter you will also have to pay. By setting up an online account through Equifax, you can gain access to all of the information needed to obtain your business credit score.
So why should you get this credit report…There are actually many reasons to stay on top of your business credit report. Not only can you spot any errors or inaccuracies, but the credit report can also help you to make changes in those areas that show up as weaknesses.
And, if you do want to apply for a business loan, for example, you are going to need to pinpoint those weaknesses and/or gaps and work on strengthening them to make your company as attractive as possible to a potential lender. Growing your business and going on to thrive can only happen if you know what you're dealing with now. A credit report will give you the current information that you need.
Other Types of Equifax Business Credit Reports
Equifax not only offers credit reports but a number of other reports that can be beneficial to your small business. By obtaining these reports you can be better informed when it comes to decision making, both for the present and future. For instance, you can pull credit reports on companies with which you're thinking about partnering. Knowing the risks before getting involved could help you avoid disaster down the road.
Things You Should Be Aware of Concerning Your Equifax Credit Report
There are some definite don'ts associated with your Equifax business report. For example:
If you do note some mistakes in the report, don't take it for granted that Equifax is aware of these. You need to be proactive and try and rectify the mistakes on your own.
Realizing that you have a solid credit score is great! However, don't take this for granted. Always stay on top of those payments and current with relevant creditors.
Always strive to keep your business and personal credit separate. You don't want one hurting the other. This way too, lenders view you with more credibility than if the two are mingled.
In Conclusion…
Simply by requesting your Equifax report, you're showing that you do care about your company's financial health, that you're diligent about maintaining a good record, and that you do want to make sure everything on the report is correct. Keep in mind, your report should be rechecked periodically. While yes, Equifax does try and stay on top of everything, they aren't always perfect. Plus, you do want to get a good feel for how other companies are viewing yours through the lens of this report.
Here at First Union, we love to advise businesses. If you have any questions, call today to speak to one of our agents!