A business credit score tells credit agencies, loan providers, and vendors or suppliers how you pay your debt when it comes to borrowing money. A higher business credit score, like a higher personal credit score, shows potential creditors that you are creditworthy.
A business credit score is exactly what it sounds like: a credit score that applies to businesses rather than individuals. Then computation of the Business Credit score is based on the data of the business credit report, which contain information about the company like:
- Number of Employees
- Historical Data
- Past Payment History
- Account Information
- Amounts Owed, and more
The higher the credit score, the better the company’s financial position indeed.
The three major business credit bureaus are Dun & Bradstreet, Equifax, and Experian. Each generates a number of business credit scores 0rdered by the client based on the type of business credit report. Which provides potential creditors with information about your company’s financial health and the likelihood of your business making on-time payments.
While the payment information for business credit bureaus is typically gathered from vendors, banks, data-gathering trade associations, and business credit card issuers.
The scoring models used by the Bureaus differ, but they all consider the following factors on how-is-your-business-credit-score-calculated:
- History of payments to creditors and vendors
- Your company’s size and age
- Your oldest financial account’s age
- Utilization of credit
- Established business lines
- Failure possibility in your industry
Below are the 3 Major Credit Bureaus:
Dun & Bradstreet
The Paydex score, failure score, and delinquency score are the primary scores used by Dun & Bradstreet to evaluate elements of a business.
Paydex score (1-100): Scores of 80 or higher are considered low risk, 50 to 79 are considered moderate risk, and lower scores are considered high risk of late payment.
Failure score (1,001 to 1,875): A lower score indicates a greater likelihood of bankruptcy or business closure within the next 12 months.
Delinquency score (1 to 5): A lower score indicates a lower risk of serious late payment (91 days or more) or bankruptcy.
To obtain a Paydex score, you must first obtain a DUNS number (which is available for free on the Dun & Bradstreet website).
Dun & Bradstreet bases its business credit scores and ratings on company information. Because missing data cannot be considered, business owners must verify company details and can self-report trade references that are not being reported by the vendors.
Equifax business credit scores
The payment index, credit risk score, and business failure score are all available in an Equifax business credit report.
Payment index (0–100): Represents previous payment history. A higher score is better, with 90 or higher indicating on-time payment of bills.
Credit risk score (101 to 992): Determines the likelihood that your company will become severely delinquent on payments. A lower risk is indicated by a higher score.
Business failure score (1,000 to 1,880): Estimates the likelihood of your company closing within a year. A lower score indicates a greater likelihood of business failure.
As a result credit risk score and a business failure score of zero indicates bankruptcy.
Experian business credit scores
Experian’s Credit Score report includes a business credit score and risk rating for financial stability, as well as information. Such as payment trends, account histories, and public records.
The higher the business credit score (1 to 100): the lower the risk of serious payment delinquencies.
Financial stability risk rating (1–5): A lower score indicates a lower risk of default or bankruptcy in the next 12 months.
Business owners should check their business credit on a regular basis to ensure that all information is correct. Despite the fact that each bureau claims to carefully vet its information, you may still find errors in your company’s report. Typically, errors can be corrected by contacting the bureaus and providing evidence that the information is incorrect.
Interested in building your business credit? Our business credit program is here to help! Whether you are a “hands on” business owner that wants to learn how to build your business credit on your own, or you are a busy professional that would like our credit assistants to help you. We have the business credit building program to fit your business needs!
