Business Credit Reports Explained

Your credit information is important. It helps lenders get a sense of your ability to repay a loan. Here’s what you need to know about credit reports.

SBA Loans • See if you Pre-Qualify

The Basics

Credit bureau scoring is defined as a statistical method to assess the likelihood that a borrower will become more than 90 days late on the payment of a loan. In other words, lenders want borrowers who will make full payments on time for the life of the loan.

Nationwide credit reporting agencies (CRAs) collect data about your business, payment history, and background. They then sell information from this report to creditors, insurers, employers, and other businesses that may use it to evaluate applications for credit, insurance, employment, or renting.

There are three major credit bureaus in the US: Equifax, TransUnion, and Experian. Lenders will usually pull credit data about their potential borrowers from one or more of these agencies. At SmartBiz Loans®, we work with Experian® to learn more about you and your business.


A FICO Score is a credit score developed by the Fair Isaac Corporation. FICO scores draw from five main factors to calculate credit worthiness: payment history, current amounts owed, length of credit history, new credit accounts, and types of credit used. Here’s how it breaks down:


To determine your FICO score, review this short post from the SmartBiz Small Business Blog. Do You Know Your FICO SBSS Credit Score?  You’ll get more details about how to calculate your unique score.

Assessing the FICO Score

To generate your score, you should have:

  • One credit account that has been opened for at least 6 months
  • One credit account that has reported within the last 6 months

It’s worth noting that a longer credit history may increase your score, but it only impacts 15% of the score calculation (see chart above). Even those with little history may have high scores depending on what the rest of the report looks like.

At SmartBiz, evaluation of the report by our bank partners includes three main segments: public records, past and current trade lines, and inquiries.

Public Records

Public records are entries that can also be found on file with a local, county, state, or federal court. Some of the most common types include bankruptcies, tax liens, judgments, and foreclosures.

Past and Current Trade Lines

Trade lines are records of activity for any credit extended to a borrower. There are several major types: revolving and installment.

  • Revolving lines of credit have a limit up to which you can continue to draw funds without the need to reapply. You’ve probably used this type of financing if you’ve ever opened a credit card.
  • Installment credit comes in the form of a single loan disbursement with periodic payments, like auto or student loans.

Learn more about lines of credit on the SmartBiz Small Business Blog.

Included in a trade line is your payment history with details on late or missed payments. You’ll find details about these delinquencies like how late, how recent, and how frequent they were as well as how much was owed at the time. This information isn’t a deal-breaker though: an overall good picture in terms of credit can outweigh a few instances of late payments.

Other negative factors to consider are high credit utilization and the number of new accounts. If you’ve maxed out several accounts, this indicates to lenders that you’re probably overleveraged and can’t take on more debt. Credit utilization is explained by credit site The Balance as the ratio of your credit card balances to credit limits. It measures the amount of your credit limit that's being used. For example, if your balance is $300 and your credit limit is $1,000, then your credit utilization for that credit card is 30%. The lower your credit utilization, the better.


A credit inquiry typically involves a lender’s request for your credit report or score. These can be divided into two types: soft inquiries and hard inquiries. Soft inquiries will not affect your credit score and won’t appear on your report. They also won’t provide the lender with as much detailed information about you. These are usually pulled in the beginning stages of the application so that you can see what type of funding you qualify for. 

A hard inquiry, on the other hand, will appear on your credit report for the two years and will affect your score for 12 months. A single inquiry should have a minimal impact on your score, but when the number of credit pulls grows, this demonstrates to the lender that there may be higher risk involved.

For additional information about hard and soft inquiries, review this SmartBiz blog post: Hard vs. Soft Inquiries. Note that this action can also be called a “hard pull” or a “soft pull”.

Liquid Credit Score

In addition to the credit score, FICO’s LiquidCredit® Small Business Scoring Service (SBSS) rank-orders business applicants by their likelihood of making payments on time. These scores range from 0 to 300 and are a required element of the SBA 7(a) loan application. The way these scores break down is harder to understand because there’s less information out there, but they’re based on personal and business credit history as well as other financial data like the age of the business. The purpose of the SBSS score is to give a comprehensive picture of your business’s financial health. Many lenders, including SmartBiz bank partners, use this score as a tool for pre-screening.  The SmartBiz Small Business Blog has an in depth article to help you learn more about this score and how you can improve yours: What the SBSS Score Is and How to Improve It


E-Tran is the SBA’s scoring system that lenders use to determine if the SBA will allow them to lend under the SBA’s delegated authority. Scores range from 0 to 300, but the only requirement is to get a passing score of 155 or higher. If the applicant passes, the lender may proceed to fund the loan. Otherwise, the lender may move forward but must follow the SBA’s requirements for loans over $350,000, which includes full collateralization of the loan.

Unfortunately, the SBA does not release what makes up the E-Tran score, so it can be hard to interpret, but pre-screening can help you to get a good sense of your situation before E-Tran is run.

In Conclusion

The various ways to gather information about your credit history all help lenders evaluate the risk associated with your unique application. At SmartBiz, we strive to be transparent about the loan application process and help small businesses thrive. 

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.