Business and consumer credit reports have similar main purposes: to provide prospective lenders with information about an applicant's creditworthiness and help them to decide whether to extend further credit. They differ in the types of information they contain and how they are used. Here is what you need to know about each.

How Business Credit Reports Work

Business credit reports provide a variety of information about a company that can be useful to prospective lenders and other parties. Unlike consumer credit reports, business credit reports are public and available to anyone. A business credit report typically includes the following information:

• Business background information, including ownership and any subsidiaries
• Company financial information
• Banking, trade, and collection history
• Liens, judgments, and bankruptcies
• Risk scores

Businesses need to be more proactive than consumers to establish a credit history so that they can obtain credit separately from the personal credit of the business owner. Without a business credit profile, lenders rely on the business owner's personal credit history for determining credit risk, which can limit the business's ability to borrow what it needs. Also, until a business establishes a business credit profile, the owner will be personally liable for any loan obligations, even if the business is a separate legal entity. It's rare for a new business to be able to get a loan without a signed personal guarantee by the business owner. To establish and build their business credit profiles, business owners need to:

• Create a separate legal entity for the business, such as an S Corp, partnership, or LLC, and obtain a federal tax identification number.
• Separate business and personal bank accounts and recordkeeping.
• Apply for a D-U-N-S number from Dun & Bradstreet to establish a file with that bureau.
• Establish trade credit accounts with vendors and suppliers.
• Obtain a business credit card that reports payments to the business credit bureaus.
• Make all credit payments on time.

The three major business credit bureaus—Dun & Bradstreet, Equifax, and Experian—generate business credit scores from that information, as does FICO. Each of the business credit bureaus has its own methods for assigning risk scores, along with different scoring ranges.

For instance, Dun & Bradstreet's PAYDEX focuses on how promptly a business pays its bills, which is useful information for potential vendors and suppliers. Experian’s Intelliscore Plus predicts the likelihood that a business will be able to keep up with its credit bills in the future, something prospective lenders will want to know. 

Business credit reports must be purchased from the credit bureaus, and they are available to anyone who pays the fee. Some free information is available from websites such as (for Dun &; Bradstreet) and .

Business credit reports can also be useful management tools. Each of the business credit bureaus offers premium reporting services that provide in-depth analysis for managing credit risk and business forecasting. A good business credit score can mean a business will have access to financing at lower interest rates, more favorable payment terms from vendors, and lower rates on some commercial insurance. Companies should order copies of their business credit reports regularly to see that they are updated correctly.

How Consumer Credit Reports Work

Consumer credit reports are to individuals what business credit reports are to companies.

When you first apply for credit, one or more of the three major credit bureaus—Equifax, Experian, and TransUnion—will begin to compile a file on your credit activities. Only people or businesses with a "legally permissible purpose," as defined by the Fair Credit Reporting Act, may request your credit report. Those can include lenders, insurance companies, employers, and government agencies, among others.

Credit reports typically provide the following information:

• A list of your credit accounts, including loans and credit cards
• The balance owed and the current monthly payment on each account
• An indication that the accounts are current and properly paid, or delinquent with the number of days past due
• A list of closed accounts
• Public records of liens, judgments, and bankruptcies

Other financial information, such as your income and assets, is not included in your credit report, so if you are applying for a loan and the lender wants to see that, you will have to provide it separately.

Your credit score is not part of your credit report, but the information in your credit report is used to generate it, using formulas developed by FICO and VantageScore.

By law, consumers are entitled to a free credit report from each of the major credit bureaus at least once a year. The official website for that purpose is .

The Bottom Line

Business credit reports and consumer credit reports contain useful information for lenders and other businesses. They can also be helpful to the companies and consumers that are the subjects of the reports when they wish to obtain additional credit. Businesses need to take a more active role than consumers in establishing a credit history and credit report, and both groups should review their reports periodically to make sure they don't contain incorrect and potentially damaging information.