A Primer on
How Business Tradelines Impact Your Commercial Credit Report
Updated October 20, 2020
Running and maintaining a business can be difficult, especially if you don’t have a lot of money to do it with. So once you establish credit via a loan, business credit card or an account with a vendor, this can be much easier. You will have the money needed to buy the supplies and other items you need to build and grow your company. Establishing business tradelines is therefore a fundamental part of building your business up and becoming successful long-term.
Learn more about business tradelines in this guide
- What is a business tradeline?
- Benefits of business tradelines
- Business tradeline reported to commercial credit bureaus
- Tradeline factors reported in Dun & Bradstreet commercial credit reports
- Tradeline factors reported in Experian commercial credit reports
- Types of business tradelines
- How to add business tradelines to a commercial credit report
- Should you consider buying business tradelines?
- Common business tradeline terms
A business tradeline is a type of account between a business and a vendor. This can include things like a business or corporate credit card, lines of credit, as well as loans. Information from these tradelines are reported to the business credit bureaus, which makes them vital for a business to use to grow their credit rating/score.
The different commercial credit reporting agencies each weigh the importance of tradeline factors when giving the business a final credit rating. A tradeline includes data on the lender, the and the kind of credit it represents. This includes the credit provider’s name as well as who is responsible for paying the bill, and if the payments are current or late. If a credit account is closed for some reason, it will still stay on your tradeline seven years.
Besides being able to get the items you need on a daily basis, having business tradelines and making regular on-time payments helps your business credit rating/score go up. That means it will be easier to get a loan in the future if you need it. Plus the interest rate on that loan will be much less.
Another factor is the price you pay for insurance for your business. With a good commercial credit score and rating you will also get better rates for your insurance needs. Insurance companies are not going to give a business with a poor credit score a good deal on the price of insurance.
It also will make it more likely your business will get more customers. That’s due to the fact that people prefer to buy from a business that’s highly rated.
All in all, a business must be able to borrow money and be able to get the items needed to run their business or they will soon cease to exist. Therefore, you must establish business tradelines with vendors and other places to stay in business for the long-term.
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The commercial credit agencies list the following information on your business credit report:
- Name of creditor or lender
- Part of your account number
- The kind of account it is (i.e. loan, revolving, mortgage, etc.)
- The date you opened the account
- The date you last used the account
- Current balance of the account
- The credit limit or amount of the original loan
- Last payment amount
- Last date the account was updated
- History of payments to the account
- Current account status (i.e. in good standing or delinquent)
- Any delinquencies reported in the past 7 years
How information is collected by top commercial credit bureaus
All of your lenders/creditors send the info of your payments, etc. to the credit agencies. Not all lenders send this info to the same agencies, so you should check to see which ones they report to if you are concerned with building your credit score in a specific agency (i.e. Experian). This info is normally sent in monthly. Since the information varies depending on which credit agency gets it, your credit scores could be different in each commercial credit bureau.
Dun & Bradstreet’ Paydex for instance includes the following things in your commercial credit report besides the items listed previously in the section on what things are reported to the credit bureaus:
- Business line
- Standard industrial classification code
- Terms of Sale
- Number of Employees
- Branch location of your business
- Corporate linkage (i.e. Parent/Subsidy or Headquarters/Branch)
Dun & Bradstreet also has several types of rating:
- Viability Rating: This predicts whether the business is likely to be still operating within the next 12 months. It also compares the business with similar businesses in the same niche to decide on viability of the business. These are done based on financial statements as well as trade experiences. They also use a data depth indicator to decide a business’ viability which shows a summary of the level of date they have on a business, and the business profile that lists the size and age of the business.
- Commercial Credit Score: The score represents the probability a business will pay debts on time or late. This is scored one to five, with one being the best.
- Delinquency Score: Next comes a delinquency score, which is also scored one to five (one is best) as well as another portion of the scale going from 101 to 670 (high scores are best). All these are used to predict if the business will pay its debts in a timely fashion.
- Financial Stress Score: D&B Paydex also uses another score called a Financial Stress Score, which predicts if the business is expected to stop operating, declare bankruptcy or just plain go out of business and not pay their debts off.
Besides these ratings, Paydex also gives a highlighted snapshot of the way the company has paid its debts over one year or two years. This helps a potential creditor to decide if the business is worthy of being approved for credit or not.
When it comes to Experian, this credit agency takes into consideration things like:
- Business branches and locations
- Lists the parent company of the business
- Address and name of business
- Length of time in operation
- Business Identification Number
- Date they started the business
- Phone number
- Tax ID number
- Category of the business (the niche it is in)
- Corporate Linkage (if a company is financially responsible for another company)
A snapshot of vital information such as key dates beyond terms (DBT) total trade balance (outstanding balance on the account as well as number of tradelines on file), highest amount of credit the business has been given in the last six months, lowest amount owed to the highest amount owed in the last six months, as well as if there is any delinquencies on their accounts like a bank lien or bankruptcy or not paying off an account at all, and any brand-new tradelines are noted.
When it comes to the business DBT, Experian provides a performance analysis of what they predict for the business over the next 60 days, i.e. their payment trend, if they pay slower than similar businesses in that niche. This is vital because it helps a potential creditor see payment patterns and know if that business has taken on a high level of debt or has made good progress in paying off its accumulated debts. All that plays a factor in its credit worthiness. Experian provides both monthly and quarterly DBT information.
Experian also has what is called Intelliscore Plus, which helps to predict whether the business will pay its debt in a timely fashion. It goes from zero to 100, with the higher score being the better in the business’ creditworthiness. Additionally if a business gets a score of 998 it means there was a bankruptcy in the past two years or if 999, it means they don’t have info on that company or not enough information.
Business tradelines are generally categorize into three types:
- Revolving: Tradeline accounts can be revolving, which means they have a regular payment due each month, but you can keep using it up to your established credit allowance.
- Installment: Loans that have a specific time frame to be paid off.
- Open account: A mix of installment and revolving that can be different every month, but it must be paid in full each month.
What are the requirements for reporting business tradelines to top commercial credit bureaus
A business needs to have at least three tradelines in order to be reported to the D&B Paydex business credit bureau. However, if can be difficult for a business to grow their credit rating/score since it’s possible a vendor or lender they deal with doesn’t report to all of the existing business credit agencies, i.e. some may report to D&B Paydex, but not report to Experian or any other example.
Experian also requires that a business provide a minimum amount of data in order to create a business credit score/rating. Unlike D&B Paydex, Experian only requires one tradeline along with one demographic element.
Why it is critical for small business to have strong business credit ratings
If a business expects to succeed, it must have strong business credit ratings, which has to include business tradelines. In order to do that it must procure those tradeline accounts by doing things like opening a business credit card, or getting credit from a vendor they buy supplies from regularly, etc. Then they must pay those payments early or in a timely fashion if they expect to have a good credit rating.
This credit rating gets determined based on things like the amount of tradeline a business has, what kind of tradelines, how long the tradeline has been open, and how well they pay their bills on time. All that is used if the business wants to have a regular supply of whatever it needs to keep being successful, grow and succeed.
It’s vital for a business to monitor its tradelines and make sure all the info being reported is accurate prior to it being reported to the commercial credit agencies. It’s much easier to fix it prior to it ending up in your business credit file than to have to get wrong information removed later on.
3 easy & practical ways for new business to boost your credit scores utilizing business tradelines
If your business is new and you don’t as yet have many tradelines, there are ways you can get other types of payments sent to the business credit bureaus besides the ones listed above.
- One of those options is busy getting your rent for your business (if you pay rent) report via a certified credit reporting agency such as RentTrack, which will send that info to all the business credit agencies. Some landlords may include reporting your rent to places like RentTrack, but if not you can sign up on their website to get them to do it for you. It is a paid service with a monthly fee. Once you have an account, they deduct your rent from your bank account and pay your landlord for you, and then this rent payment is reported to the credit bureaus.
- You also need to monitor to see if your tradeline holders are reporting the positive things to the credit agencies that are not always listed on a credit report. Therefore, you should ask your lenders/creditors to make sure things like a loan you co-signed for is listed on your report, which is in good standing. That may not always happen if you are not the primary loan holder.
- You should also not close any old accounts you may have paid off and don’t use anymore. That’s because they play into what’s called the credit utilization ratio. That is the amount of debt a business has in comparison to the amount of credit you are authorized. Just like with your personal credit accounts, you don’t want to be using a large portion of this available credit all at once. Plus they help when considering the length of holding a credit account, which is also a large factor in deciding on a business’ credit rating.
Adding new tradelines will help a business improve its credit score, and build a strong and vital credit history.
So, when it comes to adding a tradeline to your business credit file, how is this done and how long does it take to appear in your file? Some sources claim this can be done within 48 hours, but this is actually unrealistic. It can actually take a month or so for this to happen. For a tradeline to get on your business credit file list, you need to understand two things: the statement date and the reporting date of that credit account.
The statement date is the date your billing cycle ends and normally is every 30 days, while the reporting date is when the info from your tradeline is reported by the lender or vendor to the commercial credit agencies. That’s why it usually takes about a month for a new account to get on your credit file since that’s the time frame you make your payments and that it gets reported as being paid on time or late.
In some cases you might be able to get some sort of expedited service and get your new tradeline added within as few as 15 days, but that is not the normal method of getting them added to your business credit file. However, this does not normally happen unless your new tradeline has a statement and reporting date that are going to happen only a few days after you started using the account. Don’t fall for scams that claim they can get your tradelines reported in only a day or two, as this is just not possible under normal circumstances.
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Sometimes a business tries to do this quickly via buying a tradeline. Some companies will sell you access to a tradeline and add your business to someone else’s account, i.e. you become an authorized user of some other business’ corporate credit card. Then that card appears on your business’ credit file.
Typically buying a tradeline doesn’t help, as some of the credit agencies have changed their algorithm and exclude accounts in which you are not the primary account holder. Sometimes companies sell access to other businesses to help them establish their credit history faster. However, beware because many times this is a scam and considered bad by the credit agencies and can actually bring down your business credit score. You also have to be careful if you plan to buy a tradeline to help build your business credit score because some banks see it as fraud. Therefore, it’s vital to do some research if you are considering this method of getting tradelines to your credit file as some could ruin your business instead of helping you to grow and thrive.
When it comes to tradelines there are three main types: primary, seasoned and authorized user.
- Primary tradeline-- A primary tradeline is an account listed on your credit report that is assigned to only one person or entity. That business or the business owner is solely responsible for paying it off. It could include, for example, a business credit card.
- Authorized user tradeline – This is a revolving type of account added to a primary tradeline. It’s when you add another authorized user to your credit card or some other sort of credit account or loan. This is normally done to help that authorized user build their own credit rating.
- Seasoned tradeline – With this kind of tradeline, the word “seasoned” refers to a length of time. This is an account that has been in effect for two years or more. Most creditors prefer dealing with a business that has seasoned tradelines since it shows the business has an established credit history, and has been paying its bills for at least two years, and is more likely to pay the new creditor in a responsible fashion as well.
Differences between primary and authorized user tradelines
The chief difference between primary and authorized user tradelines is who is on the hook for the bills. As stated earlier, primary tradelines are the responsibility of one user who owns that credit card, etc. It gets reported to the credit agencies in their name only, no other people or entities are listed, or can charge things using this account.
When it comes to an authorized user tradeline, this means you’ve added someone to the account who can charge things on it, so therefore they are equally responsible for paying the bills.
Deciding which is better for your business depends on the situation your business is facing. If you are brand-new and have zero credit history, then getting added to someone else’s account can help you get started until you can get your own primary account. Therefore, unless you truly have no way of getting you own credit card or loan, then it’s best to stick with primary tradelines.
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