If you are considering extending credit terms to a business customer or working with a new supplier, you want to understand their financial health and creditworthiness to lower your risks. A business credit report gives you the information you need to be confident in your decision.
This blog post will explain how to run a credit check on a business, what type of information you get, and the legal guidelines.
What Is a Business Credit Check?
A business credit check evaluates a company's financial history and credit behavior. Unlike personal credit checks, business credit checks focus on:
- Payment histories for customers and suppliers
- Credit utilization rates
- Public records, such as bankruptcies, liens, and judgments
- Financial health indicators, including debt levels and profitability
This information-along with an overall business credit score-helps you understand a company’s financial health and whether it can meet its obligations.
Why Conduct a Business Credit Check?
Businesses run credit checks to reduce financial risks.
Common scenarios include:
- Extending credit terms: Confirming the company’s ability to pay invoices on time
- Evaluating suppliers: Ensuring the supplier is financially stable before relying on it to fulfill orders
- Assessing opportunities: Checking the financial health of a business before making a financial investment
Key Tools for Business Credit Checks
The three business credit reporting agencies provide slightly different types of business credit reports, giving you insight into a company's creditworthiness.
Equifax Business Credit Reports Equifax offers business credit reports that include trade payment histories, legal filings, and company profiles. These reports are suitable for understanding financial risk and evaluating a company’s credit potential.
Dun & Bradstreet (D&B) Reports
D&B specializes in tracking company performance through its proprietary D-U-N-S® Number system. Their reports feature financial stress scores, credit limit recommendations, and supplier payment trends.
Experian Business Credit Reports
Experian delivers credit scores based on public records, financial data, and payment behavior. Their reports are widely used for assessing small- to medium-sized businesses.
All three of these credit reporting agencies use different methodologies but provide insights that help you assess creditworthiness.
Pro Tip: You can easily access reports from these leading bureaus with Command Credit, which consolidates multiple credit-checking tools in one platform and does not require a subscription to use.
How to Do a Credit Check on a Business
Pulling a business credit report is easy. Here’s how to run a credit check on a business.
Step 1: Identify the Business
Collect the information about the business, such as its legal name, address, and Tax ID (if available).
Step 2: Select a Credit Reporting Service
Choose a provider like Equifax, D&B, or Experian to retrieve the credit report. If you work with Command Credit, you can access all three providers, saving time and ensuring comprehensive results.
Step 3: Review the Credit Report
Key elements to analyze include:
- Credit Score: A summary indicator of the business’s creditworthiness
- Payment History: Check whether the business pays its bills on time
- Public Records: Look for red flags like bankruptcies, liens, or judgments
- Credit Utilization: Assess the company’s current debt load relative to its credit limits
Although rare, keep in mind that mistakes do occur, so you should talk to the business about any negative marks.
Step 4: Use the Insights
Based on the information you get, decide whether to extend credit or do business with the organization. Business credit reports can give you more confidence in decisions and help you decide on the appropriate terms relative to the potential risk.
Legal Guidance for Business Credit Checks
When thinking about how to do a credit check on a business, there are a few legal obligations you should know about.
Consent
Unlike a personal credit check, you do not need permission from a business owner to run a report on their business. However, if you’re also reviewing the owner’s personal credit as part of your due diligence, you need their consent under the Fair Credit Reporting Act (FCRA), so make sure you get it in writing first.
Use Reports Responsibly
Misuse of credit data can result in legal trouble. Only use business credit reports for legitimate business purposes, such as evaluating creditworthiness or assessing risk.
Adhere to Privacy Laws
Protect the confidentiality of the information. Sharing or disclosing a business credit report without authorization may violate data privacy laws.
How to Run a Credit Check on a Business
Command Credit makes it easy to pull a business credit report from any or all three credit reporting agencies. Sign up for free, enter business information, make a payment, and instantly pull business credit reports.