Credit reports: facts and myths

How much do you know about business credit reporting in general and your small firm's credit report and score in particular?

Take this true-or-false quiz to gauge your business credit intelligence. You may be surprised by what you learn.

If you're in business, you have a commercial credit score.

False.

Unless you have bankers or vendors that report your business' payment history to a credit reporting company, you may not have a business credit file. The credit reporting companies also need what they call demographic information to generate credit reports and scores. That includes how long the business has been around, the number of employees and revenue. Some credit reporting companies rely on self-reported information. Others get the information from third parties. Some combine data from both sources.

To build your business credit history, you can ask your business creditors to report your payment history. Some credit reporting agencies will share with you the names of potential suppliers that report to them.

A sole proprietorship or business partnership will not have a business credit report or score separate from the principals' personal credit reports and scores.

False.

Although sole proprietors and partners are not considered separate legal entities from their businesses, they can build a separate business credit history by, for example, opening a credit card account in the name of their business and paying on time. Some credit reporting companies also offer a business credit report and score based on a look at a blend of the principal's consumer credit and the company's business credit history. The information is analyzed based on how it relates to the risk that the business will be seriously delinquent on its bills.

Access to my business credit report is restricted.

False.

Under the Fair Credit Reporting Act, a personal credit report is accessible only to those with so-called permissible purpose. Your business credit report is not provided that protection. It generally is available to any qualified entity that wants to buy it. Each reporting company has its own rules governing to whom it will sell a business credit report.

Business credit scores are calculated on a different scale from personal credit scores.

True.