Pulling Business Credit Reports from a Single Bureau is Putting your AR at Risk

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As a Credit Professional you aim to maximize your business’ sales while protecting your single largest asset by only accepting low credit risk opportunities.

This single largest asset that needs so much protection I’m referring to is your Accounts Receivables, and it is your job to defend it with your work life.

Well what if I told you that if you only use one business credit bureau or data source to approve new customers, you are putting your business’ Accounts Receivables in danger.

Seriously. I’m not kidding. Here’s why.

The sad scattered truth

Since business credit is not standardized like consumer credit, a business’ full credit history is scattered across the 3 major business credit bureaus (Experian, Dun & Bradstreet, and Equifax). Therefore, without evaluating the information in all of the bureau databases on a business, you are only seeing a fraction of that business’ credit history.

Why is business credit history scattered?

Before I can fully answer this question, you need to understand what a Trade Payment Experience is.

In layman’s terms, a Trade Payment Experience is the foundation of business credit. It is how prompt a business is paying back their lenders and suppliers.

Now with that definition in mind, business credit history is scattered for a few reasons:

  • Business credit profiles are established when a business’ lenders and/or suppliers report their Trade Payment Experiences with the business to Experian, Dun & Bradstreet, or Equifax.
  • Lenders and suppliers are not required to report Trade Payment Experiences to Experian, Dun & Bradstreet, or Equifax, so if they do report this information, it’s generally only to 1 of the 3.
  • Experian, Dun & Bradstreet, & Equifax do not share the business credit information they collect with one another.

Because of the reasons above, businesses can have wildly different credit files across the 3 main bureaus.

Take this common scenario as an example

John’s Toy Shop has 5 suppliers of toys.

  1. John pays Supplier #1 within agreed terms, so Supplier #1 reports to Experian that John paid them back on time.
  2. John pays Supplier #2 within agreed terms, but Supplier #2 doesn’t report how well John paid them back to any of the bureaus.
  3. John pays Supplier #3 30 days late, so Supplier #3 reports to Equifax that John paid them back 30 days late.
  4. John pays Supplier #4 120 days late, so Supplier #4 reports to Dun & Bradstreet that John paid them back 120 days late.
  5. John pays Supplier #5 within agreed terms, so Supplier #5 also reports to Experian that John paid them back on time.

Follow me here.

If you were to pull an Experian report, John’s Toy Shop would have 2 positive Trade Payment Experiences that indicate they will most likely pay you on time, an Equifax report would show 1 slow Trade Payment Experience that indicates they may pay late, and a Dun & Bradstreet report would have 1 severe Trade Payment Experience that indicates they may pay extremely late.

How do you effectively evaluate risk when dealing with scattered business credit?

Simple. You must use specifically designed multi-bureau business credit reports that pull in the business credit profiles from each of the 3 bureaus. These reports provide predictive indicators, insights, and analytics based on a business’ full credit history.

Where do you get Multi-bureau business credit reports?

You can get the world’s most powerful multi-bureau business credit report called the Advantage Pro from Business Credit Reports, Inc. for only $56 per report. You don’t have to sign a contract and there are no minimum purchase requirements. Just create your account and pull reports.

Go to businesscreditreports.com to learn more.

About The Author

Shadow Smith is the Creative Technologist of Business Credit Reports, Inc.
The world’s leading source of multi-bureau business credit reports.
You can connect with him on LinkedIn.