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Establishing Your Business Credit Rating: What is A DUNS Number?

Many successful businesses at some point have incorporated and operate via some corporate entity like a C corporation, an S corporation, a limited liability company, or some other limited liability business entity. Using a corporate entity protects your personal assets and your family’s assets from being used to pay for business debts and obligations (like a judgment not covered by insurance for a slip and fall accident). Using a corporate entity is also important from a business reputation standpoint. Reputation is vital to success in the marketplace, where consumers are increasingly using reputation rather than price as their choice basis. Consumers are aligning with brands and businesses that reflect their values. This is true for supplies, vendors, contractors, and those in the business community. Being a corporate entity is essential for building reputation. An experienced San Diego corporate attorney can help set up your corporation and keep it in compliance.

As we have discussed elsewhere on this website, being a corporate entity is also necessary for establishing a business credit rating. Having business credit is another means of protecting your personal assets. Essentially, you keep your personal and business assets separate; you do the same with personal and business debt.

Building a business credit rating is similar to building a personal credit rating. Personal credit ratings are based on payment and credit histories reported and compiled by credit reporting agencies like Equifax and others. These credit reporting agencies also gather information on businesses. In this manner a business credit report can be “pulled” in the same way that a personal credit report can be pulled.

However, with the business community, there is a larger, more commonly used reporting service provided by Dun & Bradstreet. Their reporting service goes by the tradename Paydex. Reporting information is based on what is called a DUNS number. This is a nine-digit number used to uniquely identify your business entity. DUNS stands for “Data Universal Number System.” Your business must apply for a DUNS number; one is not assigned automatically. Having a DUNS is not mandatory for running your business, but it is useful in helping to establish your business credit rating. Since obtaining a DUNS number is voluntary and requires purposeful action ā€” you must apply ā€” your business already has two “positives” from the perspective of a potential creditor:

  • Your business is savvy enough to know what a DUNS number is and to have one
  • Your business takes credit and repayment seriously (otherwise, why obtain a DUNS number?)

If the potential creditor has a choice of business partners, one that has a DUNS number and Paydex rating and one that does not, that difference might be determinative. An additional advantage of having an established DUNS number is that one is required if your business ever applies for a federal government contract or a loan from the Small Business Administration. Maybe you have no current plans to apply for either of those, but there is no harm in being prepared if business circumstances change or an opportunity presents itself.

Contact San Diego Corporate Law Today

For more information, contact attorney Michael Leonard of San Diego Corporate Law. Mr. Leonard provides a full panoply of legal services for San Diego and California businesses including corporate entity formation and annual maintenance services. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.

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Establishing Business Credit?

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Schedule a Consultation: 858.483.9200