The Secret Connection between Credit Scores, Business, and You

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The Secret Connection between Credit Scores, Business, and You

Published By Janet Gershen-Siegel at October 2, 2018

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Between Credit Scores, Business, and You – There is an Undisclosed, Secret Connection

Do you know the links between credit scores, business, and you?

Does your small business have an epic company credit score? Or it is any good at all?

So you are currently in business, and you are striving to keep on top of your small business credit scores.

Or possibly you are not, and have decided now is a good time to start. Or perhaps your company is somewhat new, and this is the very first time you’re doing this.

Irrespective of your situation, you’ve probably asked this question at least once. Are my credit scores any good?

Let’s check out the three commercial credit reporting bureaus. And we’ll solve this mystery at last.

Credit Scores, Business, and You: Checking Scores

Your best option as a business owner is to remain on top of your business credit reports from PAYDEX, Equifax, and Experian.

There are three big credit reporting agencies for companies and you really should check all three of them routinely. This is because they use moderately different criteria. And so moving the needle for one can move the needle for both of the others. Bet maybe not as much.

Do not allow your company credit scores slide, as you need to pounce on any mistakes soon as you can. Plus, you need to locate anything which is pulling your scores downward. And after that take corrective action.

You can get your reports conveniently and stay on top of all three scores by following a few basic steps.

Credit Scores, Business, and You: Your Company’s Experian Business Credit Score

Experian’s Credit Score report includes things like a business credit score along with additional data, such as account histories, payment trends, and public records. Experian business credit scores run the gamut from 1 to 100.

In contrast to Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian takes into consideration a number of factors, and not merely payment histories.

Your Business’s Experian Commercial Credit Score

Experian’s Credit Score report includes things like a small business credit score plus other data, such as account histories, payment trends, and public records. Experian commercial credit scores run the gamut from 1 to 100.

Unlike Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian takes into account several factors, and not only payment histories.

Experian Scoring Factors

The details which go into the calculation include:

  • Lines of credit your business has an application for in the last nine months
  • New lines of credit you’ve begun in the most recent six months
  • Your company’s years in business
  • Payment history in the last twelve months

More Experian Scoring Factors

  • Lines of credit in use in the past six months
  • Collections totals within the most recent seven years
  • Percent 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 more than 30 days).

Normally, even companies that use credit sensibly will get a medium-low risk rating. As you might expect, older small businesses will have a less complex time acquiring a low-risk rating.

An awesome Experian score for your company is 76-100.

Checking Your Experian Report

Experian offers a way for obtaining reports sent to you for a charge. Hence you can keep an eye on your Experian company credit score here and the setup is simple.

On the other hand, if you would rather not get continuing reports (and pay for them), then you can order a separate Experian report for your company on their website.

In addition, if there are any troubles or matters of contention, you can challenge any mistakes on your company’s Experian report if you follow the directions on their web site. Find out about examining your Experian report by checking a sampling Experian business credit report.

Credit Scores, Business, and You: Your Small Business’s PAYDEX Score

Dun & Bradstreet’s PAYDEX score runs from 0 to 100. A PAYDEX score is based upon payment information which is either reported to the credit reporting agency or is reported to data-gathering firms partnering with the agency.

D & B uses this information to recommend how much credit a lender ought to extend to your small business. So this is in addition to a credit score and financial stress score.

DUNS Numbers

In order to get a PAYDEX number, you are required to file for a DUNS number via Dun & Bradstreet’s website. The number is absolutely free. In addition the CRA must have reports of your payments with four or more vendors.

Your Small Business’s PAYDEX Score

Dun & Bradstreet’s PAYDEX score ranges from 0 to 100. A PAYDEX score has a basis in payment information which is on report to the CRA. Or it is on report to data-gathering companies partnering with the agency.

D & B uses this information, in addition to a credit score and financial stress score, in order to recommend just how much credit a credit issuer ought to extend to your company.

Getting a PAYDEX Score

In order to generate a PAYDEX number, you must file for a DUNS number by using Dun & Bradstreet’s site. The number is free of charge. Plus the credit reporting agency needs to have reports of your payments with four or more merchants.

Your small business’s PAYDEX score reveals if your payments are generally made on schedule or ahead of schedule. As you may expect, a greater 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 business’s credit score ranges from 1 to 5. 1 is the very best score. This matches your small business with other small businesses with comparable payment histories. The score shows how often those businesses tend to pay timely.

This information can really help credit issuers to comprehend your company’s standing.

But it does not truly reflect all of the payment records from your company.

Financial Stress Score

The financial stress score also runs from 1 to 5. This score matches your small business with other small businesses sharing comparable financial and business attributes.

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 more comprehensive evaluation of the business landscape, versus an analysis of your business’s actual payment history.

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

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Checking Your D&B Report (PAYDEX)

Dun & Bradstreet’s PAYDEX score of your small business can end up as one of the fundamental reasons that your company receives credit in any manner. D & B provides Credit Signal. So it is a means to keep track of your credit score. This is by having the reports come straight to you, for a charge.

You may find the fee is well worth it in order to avoid the nuisances that can result from letting this score slip. And you will not have to develop and handle the scheduling and reminders you might need to stay up to date with if you do not make use of it.

Alternatives to Credit Signal

Don’t wish to use Credit Signal? That’s fine, as you can acquire your PAYDEX report through D & B and, if necessary, you can speak with their Customer Service department (this department exists as a part of Dun & Bradstreet itself).

In addition, in order to review your PAYDEX report, check out what D & B provides, which is a sample report and even some higher level advice in ways to read it.

Credit Scores, Business, and You: Your Small Business’s Equifax Score

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

Much like the PAYDEX score, Equifax’s payment index, which is measured on a scale of 100, shows how many of your company’s payments were made on time.

These include both information from credit issuers and vendors. But it’s not designed to forecast future behavior. So that is what the other two scores are for.

Your Company’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 information 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 checks how likely it is your business will become severely delinquent on payments. Scores run from 101 to 992, and they evaluate:

  • Available credit limit on revolving credit accounts, e. g. credit cards
  • Your company size
  • Proof of any non-financial transactions (e. g. vendor invoices) which are unpaid or were on 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 likelihood of your company shutting down. It runs from 1,000 to 1,600, appraising these aspects:

  • Total balance to total current credit limit average utilization in the prior 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 past 24 months.
  • Evidence of any non-financial transactions (e. g. merchant invoices) which are delinquent or are on charge off for two or more billing cycles.

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

Overall Equifax Scoring

A good Equifax score for your business is as follows:

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

Keep your numbers up and good things will happen.

Checking Your Equifax Report

Equifax offers a risk monitoring service which is more convenient as it enables reports to go directly to you. If you do not wish to shell out money for regular reports, you can as an alternative order your business’s Equifax report.

On top of that, if you want to challenge your business’s Equifax report, you can do so by abiding by the guidelines on their site.

You can learn to review your Equifax report by browsing through an example of their reports.

Credit Scores, Business, and You: Takeaways

Often, it is a good idea to hand over a few dollars so as to ensure you acquire your business credit reports routinely. It’s a lot less troublesome than to have to always remember to do this. And you’ll probably peruse these reports more carefully, as they come with a price.

Keep on track and use the resources that these credit reporting agencies supply, and make your life simpler. Because it’s obvious; you’ve already got enough on your plate.

Because of the recent data breach, there are even more reasons to review your company and personal credit reports, and be vigilant about any issues you identify.

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 learn more about the many connections between credit scores, business, and you.

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