You Asked and We Answered: What are my Business Credit Scores as a New Business?
You’ve probably wanted to know this at some point: what are my business credit scores as a new business? So does your new business have a good company credit score?
Let’s take a look at the three commercial credit reporting bureaus.
Business Credit Scores as a New Business: Ask for and go Over your Small Business Credit Reports
Your best bet as a company owner is to stay on top of your small business credit reports from PAYDEX, Equifax, and Experian.
There are three big credit reporting agencies for businesses and you absolutely need to assess all three of them regularly. This is because they use slightly different criteria. Hence moving the needle for one can move the needle for both of the others. But it’s perhaps not as much.
Do not allow your small business credit scores slide, as you should catch any mistakes quickly as you can. And, you need to pinpoint anything which is pulling your scores downward.
Then afterwards take remedial steps. You can get your reports conveniently and stay on top of all three scores by following a few easy steps.
Business Credit Scores as a New Business: the Experian Business Credit Score
Experian’s Credit Score report includes a business credit score plus additional details, such as account histories, payment trends, and public records. Experian company credit scores run the gamut from 1 to 100.
Unlike Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian considers various factors, and not merely payment histories.
Experian Scoring Factors
The details that go into the calculation include:
- Lines of credit your business has an application for in the previous nine months
- New lines of credit you’ve begun in the most recent six months
- Your business’s years in business
- Payment history in the prior twelve months
More Experian Scoring Factors
- Lines of credit in use in the previous six months
- Collections amounts within the prior seven years
- Percent of available credit in use
- Amount of payments one – 30 days late, or 31 days or more late
- Amount of non-net-30 lines of credit (that means the payment is due in fewer or greater than 30 days).
Generally, even small businesses which use credit sensibly will get a medium-low risk rating. As you might expect, older small businesses will have a much easier time getting a low-risk rating.
A good Experian score for your company is 76-100.
Get Your Reports from Experian
Experian, one more big credit reporting firm, also offers a method for receiving reports sent to you for a cost. Hence you can oversee your Experian company credit score here and the setup is easy.
However, if you prefer to not get ongoing reports (and pay for them), then you can order a separate Experian report for your business on their web site.
Likewise, if there are any complications or issues, you can question any errors on your company’s Experian report if you follow the directions on their website. Find out about reading through your Experian report by evaluating a sampling Experian company credit report.
Business Credit Scores as a New Business: the PAYDEX Score
Dun & Bradstreet’s PAYDEX score runs from 0 to 100. A PAYDEX score has a basis in payment information which is on report to the credit reporting agency. Or it is on report to data-gathering businesses partnering with the agency.
D & B uses this data, in addition to a credit score and financial stress score, in order to recommend how much credit a lender should extend to your small business.
Getting a PAYDEX Score
In order to have a PAYDEX score, you must file for a DUNS number by using Dun & Bradstreet’s website. The number is free. In addition the bureau must have reports of your payments with four or more vendors.
Your company’s PAYDEX score shows if your payments are often made in a timely manner or ahead of schedule. As you may expect, a higher number is better.
PAYDEX Score Details
The scores break down as follows:
- 80-100: A low risk of late payments
- 50-79: A medium risk of late payments
- 49: A high risk of late payments
Business Credit Score
Your company’s credit score ranges from 1 to 5. 1 is the best score. This matches your small business with other businesses with comparable payment histories. The score reveals how frequently those companies tend to pay without delay.
This data can help credit issuers to recognize your business’s standing.
But it does not truly show all of the payment records from your business.
Financial Stress Score
The financial stress score also ranges from 1 to 5. This score matches your company with other businesses sharing comparable financial and business properties.
These similarities are in areas such as size or amount of time in business. This score shows how frequently those businesses tend to pay on time. As before, 1 is the best score. This rating is a broader evaluation of the business landscape, versus an analysis of your small business’s actual payment history.
A good PAYDEX score for your business is 80-100.
Get Your Reports from D&B (PAYDEX)
Dun & Bradstreet’s PAYDEX score of your business can wind up being among the main reasons that your small business obtains credit in any way. D & B offers Credit Signal, which is a method to keep an eye on your credit score by having the reports come immediately to you, for a charge.
You may find the expense is well worth it to avoid the problems that can spring from letting this score slip. And you will not need to create and stay on top of the scheduling and reminders you might need to keep track of if you don’t make use of it.
Alternatives to Credit Signal
Don’t wish to make use of Credit Signal? No worry, as you can obtain your PAYDEX report via D & B and, if need be, you can connect with their Customer Service department (this department exists as a part of Dun & Bradstreet itself).
Additionally, in order to review your PAYDEX report, check out what D & B provides, which is a specimen report and even some higher level support in ways to analyze it.
Business Credit Scores as a New Business: Your Business’s Equifax Score
Equifax shows three distinct business determinations on its business credit reports. These are the Equifax payment index, your company’s credit risk score, and its business failure score.
Equifax Payment Index
Similar to the PAYDEX score, Equifax’s payment index, which has its measurement on a scale of 100, demonstrates how many of your business’s payments were made in time. These include both records from credit issuers and vendors.
But it’s not meant to predict future activity. That is what the other two scores are for.
Equifax Credit Risk Score
Equifax’s credit risk score assesses how likely it is your company will become severely delinquent on payments. Scores run from 101 to 992, and they measure:
- Available credit limit on revolving credit accounts, e. g. credit cards
- Your company size
- Evidence of any non-financial transactions (e. g. merchant invoices) which are unpaid or were on charge off for two or more billing cycles
- Length of time since the opening of the earliest financial account
Equifax Business Failure Score
Finally, Equifax’s business failure score looks at the possibility of your small business closing. It runs from 1,000 to 1,600, evaluating these aspects:
- Total balance to total current credit limit average utilization in the last three months
- The length of time since the opening of the oldest financial account
- Your business’s worst payment status on all trades in the most recent 24 months.
- Proof of any non-financial transactions (e. g. merchant invoices) which are overdue or have been on charge off for two or more billing cycles.
Equifax Scoring Analysis
For the credit risk and the business failure scores, a score of 0 means bankruptcy.
A terrific Equifax score for your company is as follows:
- Payment Index 0-10
- Credit Risk score 892-992
- Business Failure score 1400-1600
Failure Risk Score
Lastly, Equifax’s business failure score takes a look at the likelihood of your new business closing. It ranges from 1,000 to 1,600, evaluating these factors:.
- Total balance to total current credit limit average utilization in the last three months.
- The length of time since the oldest financial account was opened.
- Your business’s worst payment status on all trades in the last 24 months.
- Evidence of any non-financial transactions (e. g. vendor invoices) which are delinquent or have been charged off for two or more billing cycles.
For the credit risk and the business failure scores, a rating of 0 means bankruptcy.
A good Equifax score for your company is as follows:
- Payment Index 0-10.
- Credit Risk score 892-992.
- Business Failure score 1400-1600.
Get Your Reports from Equifax
So Equifax, one of the large credit reporting bureaus, offers a risk monitoring service which is more convenient as it allows for reports to come directly to you. If you don’t wish to purchase regular reports, you can alternatively order your business’s Equifax report.
Furthermore, if you have to dispute your small business’s Equifax report, you can do so by adhering to the directions on their website.
Also, you can learn how to evaluate your Equifax report by looking into a specimen of their reports.
Business Credit Scores as a New Business: Takeaways
Occasionally, it pays to hand over a few dollars so as to make sure you receive your business credit reports regularly. It’s a lot more convenient than to have to always remember to do this. And you’ll probably examine these reports more closely, as they come with a cost.
Stay on track and make use of the resources that these credit reporting companies provide, and make your life simpler. It goes without saying; you’ve already got enough on your plate.
Because of the recent data breach, there are even more reasons to go over your small business and individual credit reports, and be vigilant about any mistakes you find.
Keep your numbers in line and good things will happen. Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN. And you’ll be able to answer the question: what are my business credit scores as a new business?