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Credit Score for Business Made Simple

Published By Janet Gershen-Siegel at April 4th, 2018

Do You Know Your Credit Score for Business?

Does your company have a good credit score for business? Does it have a credit score for business at all?

So you are currently in business, and you are striving to keep on top of your business credit scores. Or perhaps you are not, and have decided now is a good time to start. Or maybe your business is relatively new, and this is the first time you’re doing this. Regardless of your situation, you’ve probably asked this question at least once. Are my credit ratings any good?

Let’s take a look at the three business credit reporting agencies and solve this mystery once and for all.

Your Small Business’s Experian Business Credit Score

Experian’s Credit Score report includes things like a business credit score plus additional information, including 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 a variety of factors, and not just payment histories.

Experian Details

The details which go into the calculation include:

  • Lines of credit your small business has applied for in the prior nine months
  • New lines of credit you’ve launched in the last six months
  • Your company’s years in business
  • Payment history in the most recent twelve months
  • Lines of credit in use in the previous six months
  • Collections totals in the most recent seven years
  • Percentage of available credit in use
  • Number of payments one – 30 days late, or 31 days or more overdue
  • Number of non-net-30 lines of credit (that means the payment is due in fewer or greater than 30 days).

Usually, even businesses which use credit sensibly will get a medium-low risk rating. As you might expect, well-established businesses will have a much easier time getting a low-risk rating.

A decent Experian score for your small business is 76-100.

Your Small Business’s PAYDEX Score

Dun & Bradstreet’s PAYDEX score ranges from 0 to 100. A PAYDEX score has its basis in payment records. These are either reported to the CRA or is reported to data-gathering businesses partnering with the CRA. D & B uses this information, in addition to a credit score and financial stress score. This is to advise just how much credit a creditor ought to extend to your small business.

So as to have a PAYDEX number, you must file for a DUNS number via Dun & Bradstreet’s site. The number is free. In addition the CRA needs to have records of your payments with four or more vendors. Your company’s PAYDEX score shows if your payments are typically on time or ahead of schedule. As you might expect, a greater number is better.

PAYDEX Details

The scores work out as follows:

  • 80-100: A low risk of late payments
  • 50-79: A medium risk of late payments
  • 0- 49: A high risk of late payments

Your business’s credit rating ranges from 1 to 5. 1 is the best score. This matches your business with other companies with similar payment histories. The figure shows how frequently those small businesses tend to pay in a timely manner. This data can help lenders to understand your company’s standing. However, it does not really reflect all of the payment information from your company.

Financial Stress Score

The financial stress score also runs from 1 to 5. This score matches your company with other companies sharing similar financial and business characteristics. These similarities are in areas such as size or amount of time in business. This credit score for business shows how often those businesses tend to pay on time. As before, 1 is the best score.

This rating is a broader investigation of the business landscape, rather than analysis of your business’s actual payment history.

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

Your Business’s Equifax Score

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

Similar to the PAYDEX score, Equifax’s payment index, which demonstrates how many of your business’s payments were on time. It has a measurement on a scale of 100. These include both information from creditors and vendors. Nevertheless, it’s not meant to forecast future activity, which is what the other two scores are for.

Credit Risk Score Details

Equifax’s credit risk score checks how likely it is your business will become severely delinquent on payments. Scores run from 101 to 992, and they determine:

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

Business Failure Score

Finally, Equifax’s business failure score takes a look at the possibility of your small business shutting down. It ranges from 1,000 to 1,600, appraising these aspects:

  • Total balance to total current credit limit average utilization in the past three months
  • The length of time since the opening of the oldest financial account
  • Your small business’s worst payment status on all trades in the past 24 months
  • Proof of any non-financial transactions (e. g. merchant invoices) which are late or have a charge off for two or more billing cycles

For the credit risk and the business failure scores, a rating of 0 means bankruptcy.

Business Failure Score Details

A good Equifax score for your company is as follows:

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

Keep your credit score for business numbers up and good things will happen. Learn more here and get started toward understanding every credit score for business.

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