Lenders typically request a personal credit report and a business credit report when a business owner applies for credit. Both provide a summary of how well the loan applicant manages money. However, the information listed, credit scoring models, and other factors differ considerably. All business loan applicants should understand these differences before requesting commercial financing.
Business Credit Reports
The three major business credit reporting agencies are Experian, Equifax, and Dun & Bradstreet. While each reports credit data a bit differently, all use a scoring model that assigns a numeric value between zero and 100 with 100 representing no risk to the lender. The reason many lenders check both credit reports is that it can take a while for companies to establish a business credit file that shows predictable patterns of payment.
Solo entrepreneurs and small start-up organizations should focus on building their company’s credit file by starting with one small account. By paying it regularly and never going over the credit limit, they are likely to receive offers from more business lenders to help establish a consistent credit report. New business owners should also apply for a D-U-N-S number as soon as possible. The D-U-N-S number uniquely identifies the business and creates a file for it even if no financial information is available to report.
Personal Credit Reports
Personal credit scoring ranges between 300 and 850, with the higher numbers representing the lowest risk for lenders. The three major personal credit reporting agencies are TransUnion, Equifax, and Experian. Consumers may request one free copy of their credit report each year from all three of the credit reporting agencies. Both consumers and business owners can challenge any information they feel is inaccurate by presenting new information or requesting that the credit reporting agency state where it obtained its information.
Learn More About Alternative Financing Options for Small Businesses
Magis Funding offers several forms of non-traditional financing for small business owners. We invite you to contact us today to learn about alternatives to bank loans for new companies or individual business owners who may have had personal credit issues in the past.