Credit reports provide a financial snapshot to landlords, lenders, and other parties interested in determining a third party’s reliability. Business credit reports vs consumer credit reports showcase significant differences and present very different information.
Do you know which type of credit report you should review when screening tenants, considering bank loans, and taking other financial actions? Without the correct data, making ill-advised choices can lead to considerable losses. The information you need to make better decisions is out there; you just need to know where to look for it.
Today, learn more about the types of credit reports, compare business credit reports vs. consumer credit reports, and begin to understand how these reports apply to your own financial well-being.
A Table Of Contents On Types Of Credit Reports
Do you know what information is provided in a consumer credit report? Do business credit reports supply the same information or give you insight about a specific individual? Learn more about credit reporting, various types of reports, and more in today’s guide:
- What is a Credit Report?
- Business Credit Reports vs. Consumer Credit Reports: What’s the Difference?
- Business Credit Reports: Why These Matter to Landlords
- Consumer Credit Reports: Essential Tools for Landlords
- FAQs on Business and Consumer Credit Reports
- Credit Reports: The Business and Consumer Perspective
A credit report gives detailed information about someone’s credit history. Credit bureaus prepare the report using data they have gathered over time. This data typically includes personal information, employment history, credit card information, credit limits, late payments, etc.
Business credit reports include similar data, extending to business loans and beyond.
Information contained in a credit report may be used by landlords, banks, and lenders who request the report from the credit bureau. The purpose of viewing these reports is to determine the reliability and creditworthiness of the individual or business in question.
The exact details in each credit report will vary from person to person as it will vary from consumer to business. Learning more about how consumer and business credit reports differ gives you a deeper understanding of both reports.
The terminology surrounding credit and credit reporting can be confusing. Different financial situations require different types of reports.
So, what’s the difference between a business credit report and a consumer credit report?
Business credit reports cover the details of a specific business. A business credit report typically includes the following information:
- Ownership info
- Subsidiary info
- Information on current company finances
- Lien and bankruptcy information
- Risk scores
These reports are public information when a business registers for a federal tax ID number after incorporation. This means that anyone can access a business credit report, but the primary use cases occur within the lending and banking worlds.
A credit report covering information about a specific individual’s financial status and history is known as a consumer credit report. These reports typically include the following information:
- Personal identifying information (SSN, birth date, etc.)
- Status and limit of open credit accounts
- Number of loan accounts
- Closed account details
- Delinquent payment and account information
- Lien and bankruptcy information
Unlike business credit reports, consumer credit reports are not public information. An individual can view their own credit report. Otherwise, viewing is limited to those with permission to access that private information.
Parties who commonly request a consumer credit report include landlords, lenders, and insurance brokers.
As a landlord, you already know why consumer credit reports are essential to your tenant screening process.
But, why should you also care about business credit reports?
The primary reasons to care about these reports extend from one primary fact: your business’s credit report is essential. Your credit history is separate from that of your business, and it will be your business’s credit report needed to secure certain types of business loans and financial deals.
Without established business credit, your personal credit will be used to gauge how much borrowing you can do. This may limit your borrowing and thus limit the growth of your business, and there are other opportunities you will also miss out on.
For example, you may want to work with a supplier to use their trade credit system to purchase supplies for upcoming property improvements or renovations. Suppliers review business credit reports before offering this type of arrangement, and you won’t qualify if your business has an unfavorable report.
Once you’ve incorporated your business and filed for necessary tax numbers, you’ll want to take additional steps to secure a strong foundation for your business’s credit report.
You can take a variety of actions to ensure that your company appears favorably in a business credit report:
- Set up trade credit accounts with your suppliers.
- Register with credit agencies that handle business credit reports.
- Get a business credit card, use it, and pay it on time.
- Order a business credit report from each agency to see your report.
Ensuring your business is well-situated with its credit report will help you secure better loans, rates, and many other opportunities you otherwise would not have.
As a landlord, you are likely familiar with consumer credit reports, but let’s review just how essential these reports are to succeeding in the rental industry.
Credit reports give you a clear picture of what type of financial situation your tenant is in. Whether they are in good standing or have many delinquent accounts, their consumer credit report will give you the information you need to determine their renter status.
A potential tenant’s creditworthiness indicates their likelihood to be reliable with rent payments. Without checking their consumer credit report, you must take their words at face value without proof. Taking this type of risk is ill-advised and should be avoided.
Many landlords pair consumer credit reports with investigative consumer reports, such as criminal background checks. The full picture given by these different types of consumer reports ensures that applicants represent themselves truthfully when considering your property.
Remember, you will need consent from each applicant to run any type of consumer report. More information on the rules surrounding this can be found in the Fair Credit Reporting Act.
Credit reports play a major role in tenant screening. If your tenant selection process doesn’t include thorough practices, such as reviewing consumer credit reports, it’s time to improve your system.
RentPrep’s tenant screening services include various options regarding tenant scores and credit reports. Landlords see either specific credit report details or a simplified pass/fail metric to assist in selecting the right tenants for their rentals. Get started with RentPrep; check out our screening packages today.
Want to dive deeper into business and consumer credit reports? Learn even more from these frequently asked questions.
Yes, business credit scores and individual credit scores are different.
Business credit reports are generated from information about the business entity, its financial history, the company’s size, what risks it faces, and several other factors. This type of report determines a company’s creditworthiness for lenders, bankers, suppliers, and other parties looking to work with the business in question.
Personal credit scores and reports rely solely on information about a specific individual. These reports also represent creditworthiness but instead gather information about a person rather than a business. The person’s credit card, payment history, bankruptcy, loan, and other financial information is used to generate a credit score and consumer credit report.
The institutions that issue and monitor business credit reports differ from those working on consumer reporting. Equifax and Experian handle both business and consumer reporting, while Transunion focuses solely on consumer reporting. Dun & Bradstreet only handles business reporting.
Business credit is known to be easier to improve than consumer credit due to the limited factors those play into a business credit report compared to that of a consumer. In some cases, establishing and solidifying your business credit can help you secure more business support than you could get with your personal credit.
Credit reports are a specific type of consumer report. There are many different types of consumer reports, and they are all used for different purposes.
As a landlord, you usually review a few consumer reports when you do a complete background check. Credit reports, criminal history reports, and employment history reports fall under the Fair Credit Act’s definition of consumer reports.
Essentially, any communication that gathers and showcases a consumer’s creditworthiness, credit history, reputation, character, living situation, and similar characteristics is considered to be a consumer report. These reports primarily function as a way to determine credit, insurance, and loan eligibility.
If you’ve ever purchased a tenant screening package, this is a type of consumer report. At RentPrep, our qualified agents gather and share privileged information about an applicant to help you choose tenants for your rental properties.
Consumer credit reports are not public; only authorized individuals can access these reports. If there is no permissible reason for requesting the credit report, it will not be generated.
Business credit reports are public information due to the nature of being incorporated. Anyone can order a business credit report at any time from one of the agencies working on business credit accounts.
Activity done by the business doesn’t impact your personal credit once you establish a limited liability company or another type of incorporated business model. Legally speaking, you become a separate entity from your business, so your credit isn’t linked to business financials.
Equifax, Experian, and Dun & Bradstreet are the primary agencies generating business credit reports. Consumer credit reports come from Experian, Equifax, and TransUnion. The exact credit model used by each of these institutions differs, so reports for the same entity can look different depending on where it was issued.
For example, some agencies predict the likelihood of a business being delinquent on payments; others don’t include this assessment.
Credit bureaus generating business credit reports have limited access to financial information. While credit card and loan information is current, most business financials are collated, reviewed, and shared yearly due to the nature of how business finances work. This means that business credit reports are only sometimes accurate for the exact moment they are viewed.
You’re uniquely positioned as a landlord and small business owner. Your business credit report affects your ability to borrow and trade as a business. Your personal credit report changes what financial responsibilities you can take on in your personal life. And finally, the credit reports of your potential tenants determine who you will rent your properties to.
The rental industry is one of the few industries where this happens. This position gives you a complex perspective on how reports function, what goes into them, and what they mean. Don’t forget to think about the following when dealing with credit reports of all types:
- Credit reports are only as accurate as the information gathered. Is that information reliable?
- Consumer reports for individuals can only be used for specific reasons. Is yours permissible?
- Your personal credit report doesn’t change based on your business credit report.
- The information contained in personal and business consumer credit reports is different.
With this broadened understanding of consumer credit reports, you can make wise financial, managerial, and personal decisions. Make good use of what you’ve learned moving forward.