- Who Reports to Credit Bureaus?
- Are Creditors or Lenders Required to Report to Credit Bureaus?
- Why Do Creditors or Lenders Report to Credit Bureaus?
- What Is Reported to Credit Bureaus?
- When Do Companies Report to Credit Bureaus?
You’re probably familiar with the idea of credit scores and how they can impact your ability to take out loans or conduct other business activities. But do you know how it’s determined — and who can affect your business credit scores?
Credit scores for small businesses are issued by 3 major business credit bureaus: Dun & Bradstreet, Experian Business and Equifax Small Business. While they use information from public records, Unified Commercial Code (UCC) filings, business registrations, corporate financial reports, media stories, self-reported data, etc., they mostly rely on private lenders or creditors to report payment information to compile their ratings.
- Who can report to credit bureaus
- What is reported to credit bureaus
- When do companies report to credit bureaus
- Why you should work with lenders that report to credit bureaus
- Which alternative lenders report to credit bureaus
Who Reports to Credit Bureaus?
Credit bureaus get their information from:
- Banks, credit card issuers, lenders, collection agencies and peer-to-peer lending sites can furnish positive and negative payment information to credit bureaus.
- Utility companies, telecommunication providers and landlords or rental property managers can report negative information. However, they may not be able to report positive information, depending on state law and other regulations.
Note that Individuals such as friends, family members, business partners, etc., can’t report any payment information.
Are Creditors or Lenders Required to Report to Credit Bureaus?
Creditors and lenders aren’t required by law to report to any credit bureau. But most banks, businesses and financial institutions voluntarily report on-time payments, late payments, purchases, loan terms, credit limits, and balances-owed to one or more of the 3 major business bureaus.
Lenders also report significant events such as account closures or charge-offs (e.g., a mortgage being paid off.) The data collected is used by the credit bureaus to compile credit reports and as such, the reported information can impact a business’s credit scores.
Since credit reporting isn’t mandatory, lenders can choose to report to all three credit bureaus, one or 2 of them, or none at all. Also, they don’t have to reveal which credit bureaus they report to.
Why Do Creditors or Lenders Report to Credit Bureaus?
Businesses have to pay to report information to any of the three major credit bureaus. They also need to meet credit bureau reporting requirements and go through an application process to verify their credentials so they can become a data furnisher.
So, what do creditors or lenders gain from reporting to credit bureaus?
The reporting system creates a symbiotic relationship between data furnishers. When a lender reports to the credit bureaus, it’s providing valuable information to help its fellow business owners or creditors make informed decisions when extending credits and making promotional offers.
When the lender needs to evaluate a potential borrower, it can in turn leverage the information from these credit bureaus to help evaluate the applicant. This can save everyone from selling to customers who are less likely to make payments.
The more businesses participate in the reporting system, the more accurate the data is and the more everyone can benefit. Also, because lenders need to go through a vetting process, being a data furnisher can help demonstrate their credibility and attract more loan seekers.
What Is Reported to Credit Bureaus?
A business’s credit report begins when the company is incorporated and receives a federal tax identification number. Business credit reports are public information and can be accessed by anyone.
The following types of information and activities are reported to and collected by the three major credit bureaus:
- Ownership information, subsidiaries, company finances and risk scores
- Public records such as bankruptcies and tax liens
- Credit account information including payment history, account balance, the age of the account, the date of the last activity, high credit on the account and credit limit
- Debt and debt collection history
Credit-rating firms also consider tradelines, which are records of your loans and lines of credit. The information includes the type of loan, creditor name, date opened, date of last activity, loan balance, maximum balance, account status, comments, liability on the account, amount past due and amount of last payment.
When Do Companies Report to Credit Bureaus?
Different businesses file on different days and at different intervals (e.g., daily, monthly or quarterly) so a company’s credit report is continually updated to reflect the latest information.
For example, most credit card companies report customers’ balances on their statement closing dates. Meanwhile, different bureaus update their credit reports at different speeds and frequencies.
How Do You Know If Your Creditor or Lender Reports to a Credit Bureau?
The best way to find out is to ask.
Since reporting to the credit bureaus isn’t required by law, not all creditors or lenders choose to do so. Oftentimes, smaller lenders may report to only 1 or 2 of the bureaus, or not at all.
It’s best to work with lenders that report to all three business credit bureaus to ensure that your positive payment history is updated across the board. This can prevent discrepancies while ensuring that future creditors are getting the most accurate information about your business no matter which credit bureau they pull reports from.
Why You Should Borrow From a Lender that Reports to the Business Credit Bureaus
Your business is its own entity and has its own credit history. You need to build up its creditworthiness so you can more easily secure business loans or obtain business credit cards in the future. This is particularly important if your company is relatively young or doesn’t have a good payment history.
One of the best ways to build your business’s credit is to borrow from a creditor that reports to all the credit bureaus and then practice stellar borrowing behaviors, such as paying in full and on time to build your creditworthiness over time. On the other hand, borrowing from lenders not reporting to the credit bureau won’t give you this long-term benefit.
Top Alternative Lenders that Report to Credit Bureaus
Many small businesses are stuck in the chicken-and-egg conundrum. They need to establish credit history through borrowing yet it’s often difficult to get a loan from conventional lenders (e.g., banks) without a good credit score.
To start building your businesses’ credit history, you can take out a loan from these alternative lenders that report to the credit bureaus and demonstrate good borrowing behaviors:
Although relatively new to the industry, BlueVine has worked with more than 20,000-plus customers. It provides lines of credit. It further simplifies lending by charging a fixed simple interest rate with no origination fee.
BlueVine also offers invoice factoring lines of up to $5 million. The process automatically syncs invoices from your accounting software and takes 10 minutes. It’s one of the most flexible funding options and your credit limit depends on the value of the invoices you choose to submit.
Because you can receive the money as soon as a few hours post-approval, BlueVine is ideal if you need funding within 24 hours. It also works well for business owners who have pending invoices and need continuous access to funds.
(Note: BlueVine states its credit line and invoice factoring programs are temporarily paused amid the pandemic.)
OnDeck specializes in short-term loans and business lines of credit, offering quicker funding with looser loan qualifications than most banks. Loan amounts range from $5,000 to $250,000 and funding can become available within 24 hours of approval.
You can choose from daily or weekly payments, which OnDeck will automatically deduct from your business bank account.
OnDeck is ideal for businesses that face unexpected expenses or need to bolster cash flow during slow seasons. Its looser lending guidelines make it easier to borrow money if you have a less-than-perfect credit score.
Fundation uses technology and advanced analytics to quickly process and disburse installment loans and lines of credit. It’s well-regarded for its competitive rates and fees, transparent terms and hands-on customer support.
This online small business lender offers term credit of up to $500,000 and lines of credit up to $150,000. Also, no early prepayment penalties and no collateral is required for borrowing. Time-to-funding is usually less than a week, which is slower than some alternative lenders but faster than banks and conventional sources.
Fundation is ideal for established businesses that have a good credit history. While you may have to wait an extra few days, you can get rates that are comparable to traditional lenders.
The Business Backer
The Business Backer is a good resource for fast short-term financing, offering small business loans or purchase of receivables of up to $200,000 and business lines of credit up to $100,000. It’s also known to be more transparent than many other lenders in the industry.
While it works with borrowers who don’t have excellent credit ratings, the lender does charge higher fees than some other lenders. The loans are fixed interest so the rate stays constant and you don’t have to worry about fluctuations throughout the duration of the loan.
The Business Backer is a sound choice if you need short-term financing fast and have a personal credit rating of 550 or more but can’t qualify for business loans at lower interest rates. You also need to be in business for over a year and generate annual revenue of $250,000 or more.
Borrowing From Lenders That Report to Credit Bureaus
Having a high business credit score can help you more easily qualify for loans and receive better loan terms. When you use business credits, you can separate your personal and business financial obligations to protect your personal finances. Also, you can negotiate better terms with suppliers and access more avenues to obtain cash for growth and expansion.
Working with lenders that report to credit bureaus and demonstrating stellar borrowing behaviors is one of the best ways to improve your business’s creditworthiness. The information will be incorporated into your payment history and therefore, reflected in your business credit scores.
While many factors affect how you choose an alternative lender, using one that reports to credit bureaus can have a lasting impact on your business’s credit history and trustworthiness.