If you’re considering extending credit to a customer, choosing a supplier, or entering into a partnership with another business, a credit check can reveal important information you need to know. Understanding another company’s financial health helps you make better decisions.
This guide for business pros explains how to run a credit check on a company to safeguard your business interests and minimize your risk.
1. Introduction: Why Credit Checks Are Essential in B2B Transactions
The more you know about the businesses you deal with, the better decisions you make. By getting an independent evaluation of a company’s financial health, you can:
- Lower financial risks: Reduce exposure to defaults by verifying a company’s ability to pay
- Build long-term trust: Strengthen relationships by partnering with financially stable organizations
- Get early warning of concerns: Identify potential red flags early, enabling proactive risk management
Different Types of Business Credit Reports
Depending on what information you are looking for, there are different types of credit reports available from the three major credit reporting agencies. Dun & Bradstreet, Experian, and Equifax all have proprietary ways of examining and reporting data, but each report will give you an overview of a company’s financial health.
Most reports will provide you with an overall credit score and:
- Payment history: Details about timely or late payments to creditors
- Public records: Information on bankruptcies, liens, or judgments
- Financial stability scores: Predictors of financial risk and repayment likelihood
You may also find information about company financials, corporate trees, and a variety of other metrics to assess financial health.
How Do You Run a Credit Check on a Business?
Running a credit check on a company is straightforward. Here’s how to get started:
Use Command Credit for Easy Access
Rather than going to each of the credit reporting bureaus, you can go to Command Credit to simplify the process. Command Credit lets you pull business credit reports instantly without signing up for a subscription service.
To run a credit check, follow these three steps:
1. Enter company details: Provide the business’s name, address, and any relevant identifiers
2. Pay for the report: Select your preferred reporting agency or opt for consolidated data
3. Download the report instantly: Gain immediate access to critical credit information
Validate Public Records
For added accuracy, compare reports and discuss any negative information you find by talking directly with the company you’re checking on. This can uncover discrepancies or provide additional context.
Document Your Findings
You’ll want to keep records of your credit application, decision-making policies, and the outcome of your credit review. If you are denying credit, you may be required to provide an adverse action notice (AAN) to applicants. You’ll want to check with your business attorney to see if this applies to you.
By following these steps, you’ll have a clear answer to the question, "How do you run a credit check on a business?"
How to Leverage Business Credit Reports Strategically
Business credit reports can also help you do more than just assess overall risk. You can use the information you find to adjust credit limits, payment schedules, or offers based on the customer’s credit score. Some business credit reports go beyond credit scores to provide predictions and forecasts about a company’s future behavior, including recommendations for credit limits.
You can also minimize your risks. For companies with lower credit scores or adverse information, you can consider requiring partial payments, cash up front, or credit insurance to minimize your potential exposure.
Your best approach is to conduct routine credit checks for new customers or suppliers. Your criteria for making decisions based on credit data should be transparent and applied consistently to avoid claims of bias or discrimination.
It’s also a good idea to do regular credit checks, especially for key accounts, to ensure a company’s financial health has not changed. If warning signs are developing, you want to know about them as soon as possible so you can protect your cash flow or supply chain.
Making Credit Decisions with Confidence
Ultimately, running a credit check on a company helps you minimize risk, identify dependable customers and suppliers, and make better decisions for your business. When considering how to run a credit check on a company. Command Credit streamlines the process and gives you fast and easy access to the data you need.