A Quick Guide to Understanding Credit Reports
Dun & Bradstreet’s business credit reports let you see clearly and quickly what a company’s payment behavior is really like and how that affects its contractual obligations and future health. Unlike consumer credit, there’s no one single “credit score” or ranking in business credit. Our comprehensive business credit reports contain more than just operational information and trade payment history. They consist of multiple types of credit scores that range from predictive (future) and performance-based (historical) to showcase a company’s reliability and financial stability.
Reading a business credit report allows you to assess risk across an organization to uncover hidden dangers and potential hazards and make more intelligent risk decisions. Anchored by the Dun & Bradstreet D-U-N-S® Number, our comprehensive commercial credit reports contain insightful sections.
Company Credit Report Definitions
Company Profile – Snapshot with address, incorporation information, industry classification, and ownership. This section provides an overview of a business’s size and scope, how it’s organized, and how it’s been managed.
Risk Assessment – Here, you’ll find some of the most in-depth and beneficial intelligence for assessing risk and making business credit decisions. The Risk Assessment contains Dun & Bradstreet’s robust, proprietary, and reliable business credit scores and ratings, such as:
- D&B Viability Rating – A highly reliable and multidimensional credit rating system that holistically evaluates a company’s current and future health and forecasts what the next year may look like – specifically the probability that the firm will go out of business, become inactive, or go bankrupt.
- D&B Failure Score – Predicts the likelihood that the company will seek legal relief from creditors in the next year or cease operations and leave creditors on the hook. The score (on a scale of 1 to 100) is based on a company’s business history, payment habits, and industry norms.
- D&B Delinquency Score – Another predictive credit score that looks ahead at the next 12 months and (based on invoice payments) rates the business on the likelihood of it making severely delinquent payments, seeking legal relief from creditors, or ceasing operations without paying creditors.
- D&B PAYDEX® – A payment index, if you will – a unique, dollar-weighted assessment of the business’s credit history and payment performance over the past two years. These credit insights are based on trade experiences reported by vendors; it differs from the D&B Delinquency Score in that it only considers past payment performance.
Trade Payments – Dun & Bradstreet has the world’s largest commercial trade data network, with tens of thousands of companies around the world providing monthly accounts receivable (A/R) data through the Global Trade Exchange Program. Trade payments provide valuable insight to credit professionals because these records of payment behavior offer objective evidence of how the company has paid other partners. According to The Hidden Gems: Mining Maximum Insight From Your Dun & Bradstreet Credit Reports, trade payments are the most critical piece of information the credit professional can have. Dun & Bradstreet collects data from more than 700 different lines of business, and some 99.5 percent of all trade in our database comes from companies and independent third parties – no self-references or trade from inside the corporate family.
Legal Events – Understanding legal activity – bankruptcies, lawsuits, liens, judgements, and other public filings – is also crucial in identifying credit risk. Dun & Bradstreet collects business-related bankruptcy information from every bankruptcy court in the US, and each bankruptcy is investigated and confirmed by an analyst before being posted to a business credit report. Also, Dun & Bradstreet is one of the few providers to feature lawsuits in its commercial credit reports.
Corporate Linkage – With 300 million records in the global database, Dun & Bradstreet’s corporate family trees provide a comprehensive view of the relationship between companies and their majority-owned subsidiaries and branch locations. Seeing a visual representation of a corporation’s different businesses and locations can help you assess a company’s size, understand its real estate footprint, identify potential conflicts of interests, and create more accurate reporting on large suppliers. Understanding company relationships and business hierarchy helps to better identify credit risk hotspots to ensure you can properly evaluate credit limits, prioritize collections, and recognize growth opportunities.
Why Business Credit Reports are Important
When it comes to business credit, making the right decision depends on having the right information. Consulting a business credit report is an important first step in evaluating partners to avoid payment defaults, reduce exposure to bad debt, and maintain healthy cash flow. Dun & Bradstreet’s business credit reports are trusted by thousands of companies – from small businesses to large global enterprises – to help them find truth and meaning from data.
To learn more about Dun & Bradstreet’s business credit reports, download the guide D&B Business Credit Reports: A Deep Dive Into Managing Risk and Making Better Credit Decisions. It’s an annotated sample business credit report that explains the key sections of a business credit report, what they mean, and why they matter.