Understanding Business Credit Inquiries
Most small business owners view business credit inquiries in the same terms as personal credit inquiries, but — in reality — that couldn't be further from the truth! While there are certain circumstances where having your D&B report pulled could count against your company, its important for business owners to understand inquiries and what they mean to your scores and ratings.
Credit inquiries are a normal part of doing business. Any active and functioning business is going to have them. Whether you are placing an order online, setting up a new account, applying for new credit cards, requesting approval for a new credit line, or increasing one you already have, trade-based inquiries send a signal to D&B that your business is open, operating, and buying products or services. In most cases, this also tells D&B that your company is placing orders, growing, and thriving.
But if you go months or years without generating any new interest (inquiries) that usually tells D&B that your business has gone dormant (or was never really active in the first place) and that can be especially harmful if a long period of dormancy is suddenly interrupted by a rash of the wrong types of inquiries — finance-based inquiries — which can signal your company is undergoing financial distress.
FOUR TYPES OF INQUIRIES AND WHAT THEY INDICATE
TRADE-BASED INQUIRIES are those relating to a specific industry, such as:
Restaurants: food purveyors, kitchen equipment companies, dish/utensil providers
Auto repair: auto parts houses, tools, equipment, fluids, solvents, uniforms
Construction: lumber yards, dumpster rental, landscapers, roofers, warehousing
Transportation: fuel accounts, auto parts, GPS-tech, mechanics, tires
Few: You opened a new account or made a purchase
Moderate: You are trying out some new suppliers
Increased: You are growing or expanding your operations
VENDOR-BASED INQUIRIES are those relating to general purchases made any business, such as:
Printed materials: business cards, signs, menus, flyers, brochures, invitations
Office equipment/supplies: computers, printers, paper, ink, desks, chairs
Marketing materials: advertising, design services, sign rental, subscription services
Business services: accounting software, lawyers, security services, insurance
Few: You opened a new account or purchased from a new supplier
Moderate: You are testing new suppliers in preparation for changes
Increased: You are making seasonal purchases or expanding operations
DATA-BASED INQUIRIES are those seeking to verify your business data, such as:
Government: verification of specific details required for federal contracting
Identity: verification of address, phone, and principal information
Contract: verification of specific scores or ratings required to qualify
Few: You recently changed your address or bid on a contract
Moderate: You recently changed your address or expanded operations
Increased: Changes are occurring within your business or organization
FINANCE-BASED INQUIRIES are those that result in credit/debt responsibility, such as:
Finance: banks, credit cards, leasing companies, long- or short-term lenders
Insurance: business, liability, fire, marine, casualty, life, health, factoring
Real estate: rental or management agencies, holding companies, maintenance services
Few: You opened a new account, applied for credit, or are moving operations
Moderate: You are checking rates, changing locations, or expanding operations
Increased: Impending changes, increasing debt, or facing financial distress
While none of the above indicators are cut into stone, D&B's algorithms typically accept infrequent inquiries in any of these classifications as "normal business operations" that are expected from any small business. However, sudden or higher than normal activity can send those same algorithms into complete disarray, so you should be aware of what happens the moment you press the APPLY button.
UNLIKE PERSONAL CREDIT INQUIRIES...
There is no limit on who, how often, or under what circumstances someone can pull your company's business credit report.
Commercial credit reporting agencies are not required to tell you the name of the company that pulled your business credit report, only the industry assigned to their company.
Tracking inquiries generated when new accounts are opened or applications are submitted can be a valuable indicator as to whether your supplier or creditor will report your payment history.
Your permission is not required. Any person, company, agency, or organization can pull your business credit report at any time without your knowledge or authorization.
Inquiries typically stay on the D&B report for up to two years, but they only impact scores and ratings for a maximum of one year.
Inquiries cannot be removed from your D&B file for any reason.
Inquiries do not tend to impact the scores and ratings unless they are excessive in number (indicating possible fraud) or are associated to specific finance-based industries.
A lack of inquiries does not indicate financial strength, but just the opposite — that your business is no longer active and functioning.
For further information about inquiries on your D&B business credit report, feel free to reach out to me directly with your questions by calling 800-918-7505 (ext 2) or clicking to initiate a CHAT online.