The Role of Credit Bureaus

Before you extend credit to a client — whether it's another business or a consumer — it's a good idea to check their credit record. To do that, you need to contact a credit bureau.

Credit bureaus are independent agencies that, for a fee, provide information about a company's credit history. They

don't make any actual lending decisions; that's left up to you. Instead, they collect information from banks, retailers, and finance companies, and look at public records such as tax liens, bankruptcies, and monetary judgments. Taken together, that information can be vital in preventing late payments — and the profit shortfall that they can cause — before they start.

For a small fee, you can become a member of a credit bureau. Equifax, Experian, and TransUnion handle consumer reports, and D&B is the largest credit-reporting agency for businesses. As a member of these bureaus, you can access credit reports and report delinquent customers.