Dun & Bradstreet rating guide

If you’re a business owner, it’s likely that when you applied for financing or leasing a property, the bank or leasing agency checked your business’s Dun & Bradstreet (D&B) rating. Dun & Bradstreet is a company that gives potential investors or financiers insight into a business by providing a score of its creditworthiness — similar to how other credit bureaus provide consumers with personal credit scores.

If you own a business, you should keep an eye on your D&B rating to ensure your score reflects good standing, because just like with personal credit scores, a low rating can affect future business deals. Here’s what to know about this important business credit rating:

History of Dun & Bradstreet

Knowing the origins of the D&B rating can help you understand their purpose today.

Dun & Bradstreet, originally known as Mercantile Agency, was founded in 1841, according to their website. The company had the mission to create a network that could provide reliable information about businesses and their credit. As they opened more offices and expanded, they began hiring professional credit reporters to add more legitimacy and insight into their network.

In 1849, a competitor company — the John M. Bradstreet Company — arrived on the scene and heavily pushed the idea of providing businesses with credit ratings.

In 1933, the two companies put their intense rivalry to an end by merging to become the Dun & Bradstreet known today. After the merger, the Data Universal Numbering System (D-U-N-S) was created, and the company began leaning much more heavily into their services and analytics. Businesses that work with D&B can not only get a credit rating from them, but also a variety of business solutions and services.

What is the D&B rating?

A Dun & Bradstreet credit rating is a score that indicates the financial stability and creditworthiness of your business.

These scores come from all of the information that D&B complies on individual businesses. Seeing a D&B rating helps financial institutions decide whether to extend credit, financial support or even supplies to a business, whether it’s for investment purposes, business loans, small business credit cards, long-term lease agreements or equipment financing.

A D&B rating is broken down into two segments in an attempt to provide accurate and fair information on a company’s financial strength and composite credit appraisal, according to their credit rating overview. Those segments are:

• Financial strength: This reflects a company’s size based on information the business provides to D&B. Scores range from 5A for companies with more than $50 million in net worth to HH for companies with a net worth of under $5,000.
• Risk indicator: This is a composite credit appraisal that shows a company’s creditworthiness on a rating scale of 1 to 4, where 1 is considered a high score and means “minimal risk” and 4 is considered a limited score and means “high risk.” This indicator factors in a business’s history of making trade payments, years in business, number of employees and legal structure, as well as negative information about the firm.

How D&B generates a business rating

Dun & Bradstreet generates credit ratings and scores based on information provided by your business, as well as lenders and suppliers, which report your payment information to D&B. D&B also looks at public records related to your business, such as regulatory requirements or business tax reports.

If you aren’t able to submit a financial statement to D&B, the agency will calculate a limited rating without it — but providing accurate and comprehensive information about your company is the only way to receive a coveted 1 score. That information is used to calculate the main types of D&B credit ratings assessed by potential business investors, lenders and vendors.

Types of D&B credit ratings

D&B reporting includes various credit ratings, reports and recommendations that determines a business’s overall creditworthiness to future creditors and vendors Here’s a general overview of each:

What impacts my business D&B rating?

Many factors can affect your D&B rating, including:

• Changes in your business’s finances or payments. Positive changes could be an improvement in how your business is maintaining payments, while negative changes are a history of late or skipped payments.
• Potential legislation. The documentation you provide to assess your business’s standing might reveal potential legal issues, which can affect your business’s rating.
• Not providing documentation at all. While it’s not necessary to provide documentation, your business can only reach a maximum rating of 2 without it.
• Maxing out your credit. Maintaining regular payments on your loan products is not enough. It’s also important to keep your borrowing within acceptable limits to avoid maxing out your lines of credit.

How to obtain D&B credit scores

The first step on how to get a D&B rating is to create a D-U-N-S number — which you can request online. This number allows you to build your score. In some cases, you might find that your number has already been created for you based on searches by your suppliers, clients or lenders.

Once the D-U-N-S number is created, you can establish your business credit file and sign up for CreditSignal, which alerts you when there are changes to your score. Full reports are behind a paywall, which requires you to sign up for one of the packages.

How to improve my business’s D&B rating

• Review and analyze your reports

  It’s important for you to know what credit bureaus and similar agencies are saying about your business. The fastest way to get a breakdown of your standing is by reading your D&B credit reports. If you find any errors, report them to D&B immediately.
  

• Manage your repayments and lines of credit

  Make sure to prioritize on-time payments for your loans, business credit cards and other financing products. If you’ve missed payments before, work to get on a more regular and reliable payment schedule, and stay within your maximum lines of credit. Credit lines that are constantly maxed out can bring down your credit rating. And if you have no credit, consider applying for a small loan to start building your business credit history.
  

• Submit updated business information to D&B

  A D&B rating doesn’t require you to provide documentation for the rating to generate. However, D&B will only score your business a maximum composite credit appraisal of 2 without it. To get that rating to 1, you must provide more than what D&B is able to find in public records.
  

The bottom line

Dun & Bradstreet has a long history as a credit rating bureau that focuses solely on businesses. A D&B rating is important for both small and large businesses in that it can directly affect the terms you get on future financing and business contracts, affecting your prospects for growth and progress. Keep an eye on your score and take steps to maintain or improve to stay on the best terms for your business dealings.