How a DUNS number can help build business credit
By Dawn Papandrea
November 3, 2014
As a business owner, you want to build your business credit with the same care you've built your personal credit.
But the world of business credit can be vastly different. For one thing, there is a something called the Dun & Bradstreet DUNS number that is central to the collection of data for your credit. And, there are other important reasons for getting the DUNS.
Here's a quick overview on what it is, along with some additional benefits of having one.
What is it?
DUNS stands for Data Universal Numbering System, and it's a nine-digit identifier for businesses, explains Amber Colley, director of Dun & Bradstreet Credibility Corp. Each DUNS number is unique and is used to verify the existence of a business entity globally. Similar to how we are assigned a Social Security number as an individual, your DUNS numbers stays with your business over the life of the company.
Once you have that number, you'll have the start of what will be your business credit file with Dun & Bradstreet (D&B), which is an aggregator of business credit data, with more than 225 million records on businesses from the U.S. and abroad. Over time, lendors, vendors, and partners may wish to access your business credit report (much like banks and creditors do when you apply for personal credit).
How do you get one?
Any business owner, from sole proprietor to large corporation, can go online and request a DUNS number for free. It normally takes about 30 days to process, but you have the option to pay for an expedited service should your business needs require you to get the number quickly.
Here's what you need to apply:
- Business name
- Owner's name
- Type of company (corporation, proprietorship, etc)
- Year business began
- Type of business
- Number of employees
The big question: Do you really need one?
Because it's free, it can't hurt to request one in case you do end up needing it down the line. Here are some of the reasons you would need a DUNS number:
1. You need one to establish business credit with Dun & Bradstreet. A D&B credit score is a leading business credit scoring model, and you have to have a DUNS number to start your file. (Other business credit scorers include Equifax Business, Experian Business and Business Credit USA.) “If you want to buy products from wholesalers or distributors on credit, your business credit history will list you either as a good, fair or bad credit risk,” says MaryAnn Pinto, managing member of Federal Contract Solutions. It's important to note that just because you have a DUNS number, doesn't mean you'll automatically have a thick business credit file with D&B, says Colley. She compares it to having a resume with just your contact information listed and no work history.
Similar to your personal credit report, your D&B credit report and score is based on the history of your financial transactions, although, unlike your personal credit reports, not all business transactions are automatically reported to D&B, Colley says. “You can have a hand in what is actually included in your D&B report by providing a list of vendors that you buy from. D&B then reaches out to those businesses, and records that information in your file,” says Colley.
These records are known as trade references. Should you decide to go this route, however, keep in mind that Dun & Bradstreet Credibility Corp.'s CreditBuilder service has a monthly fee of $89, so getting some advice from a business credit expert on whether such an investment makes sense for your company is wise.
2. If you want to do business with the government. If you ever plan to work with federal, state or local government proposals or contracts, the first thing you'll be asked for is your DUNS number. In fact, the U.S. Small Business Administration lists “obtain a DUNS number” as the first step toward registering for government contract work.
“In order to do business with the U.S. government, you need to be registered in a database called SAM or System for Award Management, and to get in, you need a DUNS number,” says Pinto. “It is as simple as that.”
3. If you want to apply for a federal grant. WhiteHouse.gov spells this one out best: “The federal government requires that all applicants for federal grants and cooperative agreements with the exception of individuals other than sole proprietors, have a DUNS number.”
4. Vendors, partners, lenders or competitors may check up on you. Unlike your personal credit file, anyone can pull your D&B credit report as long as they're willing to pay for it. “Most big businesses run a D&B report on a business before they start to purchase product,” says Pinto. “It is used as a sign of stability.
“On your end, you won't know the specifics of who's looking at your credit, but you can check how many inquiries are being made, and from what general industries. Let's say you need to lease equipment. Some partners may require a credit history on how you paid your bills,” says Colley. Without a DUNS number, and therefore no D&B credit history to rely on, the vendor or lender would be forced to inquire into your personal financial history. And as Colley points out, many small business owners are cash strapped and/or maxed out on their personal credit because they put everything they had into their business.
Overall, getting a DUNS number is free and easy to obtain. Taking the next step to build and influence your D&B credit report is a more complex strategy that you might consider later, depending on the nature of your business.