The Credit Rating for Business Decoded

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The Credit Rating for Business Decoded

Published By Janet Gershen-Siegel at July 2, 2018

Credit Rating for Business Decoded Credit Suite-What is the Credit Rating for a Small Business-Your Business Credit Report Decoded-Find out your business credit rating>

Need a Credit Rating for Business Decoded?

Written by Janet Gershen-Siegel

What is your business credit rating? Do you know what the numbers mean? Does your business have a good commercial credit score? If you’re unsure, don’t fret. You just need a credit rating for business decoded.

So you are presently in business, and trying to keep on top of your company credit scores. Or possibly you aren’t, and feel now is a good time to start. Or maybe your business is reasonably new, and this is the first time you’re doing this.

Regardless of your situation, you have most likely asked this question at least once – are my scores any good?

Let’s take a look at the three business credit reporting agencies and solve this mystery at long last.

Experian Commercial Credit Rating for Business Decoded

Experian’s Credit Score report includes things like a company credit score along with other facts. These include account histories, payment trends, and public records. Experian business credit scores run from 1 to 100.
Unlike Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian considers a number of factors. They don’t just look at payment histories.

Specifics

The elements that go into the calculation include:

  • Lines of credit your company has an application for in the previous nine months
  • New lines of credit open in the last six months
  • Time in business
  • Payment history in the most recent twelve months
  • Lines of credit in use in the previous six months
  • Collections amounts in the last seven years
  • Percentage of available credit in use
  • Amount of payments one – 30 days overdue, or 31 days or more late
  • Amount of non-net 30 lines of credit. That means the payment is due in less or greater than 30 days

Typically, even businesses that use credit sensibly will get a medium-low risk rating. As might be expected, older businesses will have a much easier time getting a low-risk rating.

A good Experian score for your company is 76-100.

PAYDEX Credit Rating for Business Decoded

Dun & Bradstreet’s PAYDEX score ranges from 0 to 100. A PAYDEX score has its basis in payment data. This is either reported to the agency or to data-gathering firms partnering with the agency. D & B uses this data, alongside a credit score and financial stress score. This is to recommend how much credit a creditor ought to extend to your small business.

PAYDEX Specifics

To get a PAYDEX score, file for a DUNS number on Dun & Bradstreet’s website. The number is free.

In addition the agency must have reports of your payments with four or more vendors. Your business’s PAYDEX score shows if your payments are often made on time or ahead of schedule. As you might expect, a higher number is better. The scores work out 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.

Your business’s credit score ranges from 1 to 5. 1 is the best score. This matches your business with other businesses with similar payment histories. It shows how often those businesses tend to pay on time. This can help lenders understand your business’s standing. However, it does not really show all of the payment data from your business.

D&B Financial Stress Score

The financial stress score also ranges from 1 to 5. This score matches your business with other companies with comparable financial and business attributes. Similarities are in areas like size or time in business.

This score shows how often those businesses tend to pay on time. As before, 1 is the best score. This rating is a broader look at the business landscape, versus an analysis of true payment history.

A great PAYDEX score for your company is 80-100.

Equifax Credit Rating for Business Decoded

Equifax displays three separate business determinations on its business credit reports. These are the Equifax payment index, your company’s credit risk score, and also its business failure score.

Also like the PAYDEX score, Equifax’s payment index, on a scale of 100, shows how many company payments were on time. So these include both information from creditors and vendors. Nevertheless, it’s not meant to predict future activity. However, that is what the other two scores are for.

Equifax Credit Risk Score

Equifax’s credit risk score assesses how likely it is your business will become severely delinquent on payments. Scores range from 101 to 992. So they show:

  • Available credit limit on revolving credit accounts, e. g. credit cards
  • Company size
  • Evidence of any non-financial transactions (e. g. merchant invoices) which are delinquent or charged off for two or more billing cycles
  • Amount of time since the opening of the oldest financial account

Equifax Business Failure Score

Finally, Equifax’s business failure score looks at the risk of your business closing. It runs from 1,000 to 1,600. It shows:

  • Total balance to total current credit limit average utilization in the last three months
  • The length of time since the opening of the earliest financial account
  • A company’s worst payment status on all trades in the past 24 months
  • Proof of any non-financial transactions (e. g. vendor invoices) which are overdue or have charged off for two or more billing cycles

Also, for the credit risk and the business failure scores, a score of 0 means bankruptcy.

Hence a decent Equifax score for your business is as follows:

  • Payment Index 0-10
  • Credit Risk score 892-992
  • Business Failure score 1400-1600

Your Business Credit Rating Will Help Your Company for a Long Time to Come

So keep your scores up 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.

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