Published By Faith Stewart at January 7th, 2020
There are so many factors that affect the fundability of your business. Truthfully, your Experian profile is just one link in a very long fundability chain. However, that does not mean it isn’t important. As you know, it only takes one weak link to break a chain. As a business owner, it is important to understand your Experian financial profile.
What does your Experian profile have to do with the fundability of your business? A lot actually. In fact, not only does your Experian business profile impact fundability, but your personal Experian profile does as well.
Simply put, fundability is the ability to get funding for your business. If you are fundable, lenders see your business as one that can and will pay its debt. Since lenders are in it to make money, they see a fundable business as one that will offer a return on investment. That part is easy. The real question is, how does a business become fundable?
Sadly, the answer to that question is not quite as simple. Sure, a great business credit score is important. In addition, many of the things that are important for a strong business credit score are necessary for fundability as well.
The thing is, there is a lot more to fundability than credit score. You can find out more about that here. For now, let’s talk about the role the Experian plays in the fundability of your business.
First, you should know that Experian keeps files on both your personal and your business finances. Consequently, if you own a business, you have a business profile with them as well as a personal profile. In most cases, a personal and business credit profile is totally separate. However, with Experian, that isn’t always the case. While they do keep the two separates if you set things up that way, they also issue a combined report that incorporates your personal credit as a piece of business credit for lenders making decisions.
For you, that means that at least as far as your Experian profile is concerned, your personal credit history can actually affect the fundability of your business.
You can see your personal Experian financial profile here.
Of course, it’s pretty obvious how Experian business credit can affect fundability. The big questions still remain however. What do you Experian reports tell lenders? Where do they get their information? How do they calculate their business credit score, and what does it mean?
Experian keeps business credit profiles on 99.9% of all United States companies. In addition, it claims to have the credit industry’s most broad data on small and mid-sized businesses. That’s why, if you own a business, it likely has a business Experian file.
According to Experian, all their information stems from third party sources. That means you cannot add anything to your profile. Still, you can check your profile and let them know about any inaccuracies. As a result, you have to know what that report is telling lenders about you and your business to stay ahead of the game. Also, you need to know where the information comes from, and what you can do about it.
First, there isn’t just one score. On the contrary, your complete business Experian profile consists of a number of reports and scores. Lenders can choose to use any or all of them. Each one tells them something different. It takes all the scores put together to get a complete credit picture, but not all lenders look at all scores.
Quite simply, the Intelliscore Plus credit score shows credit risk based on statistics. It is a highly predictive score. As such, its main purpose is to assist users in making well informed credit decisions.
The Intelliscore scores range from 1 to 100. The higher your score, the lower your risk class. The opposite is true as well. Meaning, the lower your score, the higher your risk class.
One of the things Intelliscore is most known for is the identification of key factors that can indicate how likely a business is to pay their debt. There are over 800 commercial and owner variables used to calculate an Intelliscore Plus credit score. They can be broken down like this:
This is just your current payment status. It’s how many times accounts have become delinquent. Additionally, it shows how many accounts are currently delinquent and overall trade balance.
The frequency factor shows how many times your accounts have been sent to collections. It also notes the number of liens and judgments you may have. Any bankruptcies related to your business or personal accounts are in the part as well.
In addition, frequency includes data regarding your payment patterns. Were you regularly slow or late with payment? Did you decrease the number of late payments over time? As you can imagine, those things make a difference.
This specific factor focuses on how you use your credit. For example, how much of your available credit are you using right now? Do you have a high ratio of late balances when compared with your credit limits?
Of course, if you are a new business owner, a lot of this information will not exist yet. Intelliscore Plus handles this by using a “blended model” to identify your score. That means that they take your personal consumer credit score into account when determining your business’s credit score.
FSR predicts the potential of a business going bankrupt or not paying its debts. The score identifies the highest risk businesses by making use of payment and public records. These records include all of the following and more.
This is a one-page report that provides a summary of the business and its owner. A combined business-owner credit scoring model is more comprehensive than a business only or consumer only model. Blended scores have been found to outperform consumer or business alone by 10 – 20%.
Experian sells a number of products which can be used to monitor your business’s credit with them.
This option is $149 per month and incorporates mobile-friendly alerts and score improvement recommendations.
This report costs $49.95 and includes in-depth financial payment details. Also, it offers predictive information on payment behavior.
A cheaper option at $39.95, this report contains details on the company, credit information, and a summary of financial payment information.
The valuation report costs $99. It shows the market value of your small business and features key performance indicators. It also displays your company’s fair market value.
Experian also sells premium corporate profiles. These are enhanced profiles that contain extra information. For example, sales figures, size, contact details, products and operations, credit summary, and any Uniform Commercial Code (UCC) filings will show up here. This report also includes fictitious business names, payment history, and collections history.
In addition, you can subscribe to business credit alerts through Experian’s Business Credit Advantage program. This is a self-monitoring service that offers limitless access to your company’s business credit report and score. It allows business owners to proactively manage small business credit. Alerts are sent when:
– Company address changes
– Business credit score changes
– Credit inquiries show up
– Newly-opened credit tradelines are added
– Any USS filings open
– Collection filings open
– Any public record filings pop up. This includes liens, bankruptcies, and judgments.
Despite all that business Experian credit monitoring offers, it is pricey. Monitor your business credit at Experian and Dun & Bradstreet here for much less.
Since both your personal and your business Experian profiles affect the fundability of your business, it is important to understand how to make positive changes if you need to.
While you may not be able to do anything to make a big score increase happen all at once, you can definitely do some things that will make a positive difference over time.
This is number one. Over time, paying your bills on time will help establish your company as one that pays their debts. This will definitely help push your score up and show other firms that you are a low credit risk.
The more debt you have, the more monthly bills you have. As a result, you have less of your income available to spend. If your overall debt is close to or even over your income, it will look like you are a high credit risk.
Keep your debts in check and consistently pay them down or off to keep a good balance between what you make and what you owe.
Keeping your debts low is good advice, but you have to use the business credit accounts you have. You make payments on accounts for your score to grow. Having a ton of credit and not using it at all doesn’t really help. Again, balance is key.
There is no need to buy things you do not need however. Even if you can pay cash, use credit for the things you would be buying regularly for your business regardless. Then, use the cash to pay the credit account.
By now, you’re aware that personal credit is fair game when it comes to your Intelliscore Plus score. But don’t fall into the trap of thinking your personal credit doesn’t matter. If it is bad, there are options for working around it. However, it is much better to just keep it strong. Making certain you stay on top of your monthly bills is the number one way to keep your personal score healthy. Avoid unneeded credit inquiries, and refrain from compromising your personal credit for business needs.
This means setting things up in a way to actually have separate personal and business credit. Find more about how to do that here.
No matter what your credit score is, it is crucial that you continue to be diligent and review your personal and business credit reports. This can help you spot possible errors and stay on top of your Experian financial profile.
For personal credit this is easy and free. Not only can you get a free copy of your personal credit reports annually, but there are a number of free services that offer you a peek at your personal credit score throughout the year.
As mentioned above, keeping track of your business credit will cost you. The good thing is, there are options to fit most budgets.
Experian is well known in the personal credit world, but when it comes to business credit, Dun & Bradstreet often gets all the glory. Your business Experian financial profile can definitely affect fundability however. Throw in the fact that Intelliscore has a personal credit aspect, and you can see just how much your Experian reports can matter.
Keep monitoring all your credit reports and make changes when needed. Work hard to ensure only positive information is reported to all credit reporting agencies. Also, take the time to do a fundability analysis on your business. So take action where needed. If you do these things, you should be able to get funding for your business whenever you need it. Whether you want credit cards, loans, lines of credit, or some combination, you shouldn’t have a problem.