One of the driving forces that determine your ability to achieve business credit is the rating generated for your company by Dun & Bradstreet®, the world’s most trusted source for business credit data. Contrary to what most frustrated business owners believe, there is no mystery formula, no secret algorithm, and no personal influence being weighed to produce this deciding factor. Your D&B® rating is based upon information gathered about your business from the sources D&B® trusts. Primary among those sources, believe it or not, is you – as an active participant in your own business.
To better understand how you can impact your credit approvals, you first must participate in the ongoing management of your D&B® rating.
There is a never-ending flow of data between D&B® and various lenders, creditors, vendors, suppliers, government agencies, and business owners. This data will have a positive or negative impact on your various scores, overall composite credit appraisal, and your actual D&B® Rating. But there are ways that you can impact your rating, simply by providing “real-time” information about your company to D&B®. The lack of viable information is the main reason why a company will lose their rating or have it downgraded to the point where they can no longer achieve credit.
D&B® rates businesses in one of two ways, either by the input of a company’s financial statements into the public record, or by looking at your employee count and overall credit information they receive from others.
But first, let’s start with a brief overview of the various ratings we most often see…
NQ – This is an acronym for Not Quoted. This rating is generally assigned to a company if D&B® cannot verify a business is in active operations. When D&B® has repeatedly attempted to validate a company and cannot, they remove any and all information from the report and place an NQ rating to restrict any lender or creditor from having to pay to view a report that will provide absolutely no beneficial information to help determine creditworthiness.
DS – This is an acronym for Duns Support®, which basically means that D&B® can acknowledge that a company exists, but they do not have enough of the required information to be able to generate scores and a full rating. This is the most common rating we see when a company does not know a D&B®report was created for their company or have taken none of the necessary steps to fill their credit file with worthwhile data. Generally speaking, no credit will be established for a company with a DS rating.
“--“ – Known as a dash-dash rating, -- signifies that your company’s credit profile is “incomplete”. While many think this means they have no rating, quite the contrary, D&B® acknowledges your existence and is simply missing one or more pieces of data that allows them to create a “full” rating of your business. There are seven required data elements, known as the Super 7, that allow D&B® to make a viable determination as to your creditworthiness. They are like pieces of a puzzle that come together to create an overall picture. If one piece of that puzzle is missing, the picture is incomplete. A trained eye can spot the missing element and help you to reverse the negative consequence.
1R2, 1R3, or 1R4 – 2R2, 2R3, or 2R4 — When a rating is based upon employee count (meaning no financial statements have been submitted) there are two classifications: 1R for 10 or more employees (or) 2R for less than 10 employees. The number that follows the R is representative of the overall composite credit appraisal. If the R is followed by a 2, the overall information in your report says you are a good credit risk. If the R is followed by a 3, the risk in extending credit it moderate. If the R is followed by a 4, the risk is elevated and the lender may rethink offering you Net30 terms. We help you to fill your report with credible payment history to keep that risk low.
5A to HH – If a company provides financial statements to be placed into the public profile, D&B® will rate the business on its financial strength, gauged upon a composite of the Profit and Loss report and Balance Sheet. The ratings will range from a 5A for $50 million or more, all the way down to an HH for $5000 or less. The letter classification will be followed by one of the following: 1 for low risk, 2 for minimal risk, 3 for moderate risk, or 4 for increased risk. While companies are not required to provide their financial statement into the public record unless they are a publicly traded company, many choose to do so because, in most cases, this disclosure will better represent the financial strength of their business and will lower their risk ratings, thus improving their D&B® rating.
LESSON: Understand the value of a full D&B® rating and the impact it can have on your business credit approvals. Make sure D&B® has all of the pieces of your puzzle so a solid composite credit appraisal can be made for your company. If you can't quickly find a particular piece of information online, then D&B® will not be able to see it either, and will therefore not be able to validate your company and generate a full rating.