Step 3: Establish a Credit Rating with Dun & Bradstreet

A solid credit rating from Dun & Bradstreet is like a Good Housekeeping seal of approval for your business. In many cases, companies will choose whether or not to do business with you based on this rating alone.

What is Dun & Bradstreet? It's the world's largest credit bureau, maintaining a huge database with information on more than 100 million businesses across the globe, including 38 million in the United States. Companies of all sizes rely on D&B to provide the information they need to build profitable relationships with their customers, suppliers and partners.

How does D&B determine your credit rating? It looks at a number of factors, including how prompt you are in paying suppliers, repaying loans, and meeting monthly financial obligations. Along with payment history, strong consideration is also given to cash flow, the financial resources of your company, working capital, and net worth. It also considers additional data like corporate finance reports, business filings, lawsuits, and judgments against your company. D&B also relies on self-reported data, including direct investigations and interviews with company principals and other businesses that you work with.

Three other companies -- Credit.net, Equifax, and Experian -- also provide business credit reports, but D&B remains the dominant force in the industry. Your business's creditworthiness is ultimately determined by what are known as the four C's of credit: capacity (what is your ability to repay the loan?), character (will you repay the loan?), capital (what are you worth?), and conditions (how do external factors impact your business?).

A key step toward building excellent credit is to establish a rating with D&B. First you need to apply for a D-U-N-S (Data Universal Numbering System) number from D&B. Your D-U-N-S number is free, and you can apply online. This will begin the process of establishing your business credit record. The application process is pretty straightforward and you should receive your number in 30 to 45 days. You can also get an expedited D-U-N-S number in 5 business days or less.

D&B rates and reports your business credit as a Paydex score. While personal FICO scores range typically between 500 and 800, with scores over 720 being very good, business Paydex scores range between 0 and 100, with scores over 80 considered the best.

Businesses that pay accounts before invoices are generated receive high scores for their payment history. To drive your Paydex score up rapidly, you need to use five accounts every month and, immediately after purchasing, send a check to the company to pay for your purchase. You do get rewarded for paying early.

Once you have a business credit rating, be sure to review your credit profile at least once or twice a year. Make sure your profile has the most accurate information, and that no errors appear on the report. If you do find errors, you need to contact D&B and report the errors immediately. And always have paperwork ready to support your argument.

A good credit rating from D&B is essential to the smooth operation of any business. You'll go far by keeping one eye on your balance sheet and the other on maintaining a good business credit rating.