It is important to know how to check business credit score for a few reasons. First, you just need to know what is going on with your business credit. Why does it matter? Because business credit is one of many things that can affect the fundability of your business. Do you know how to check business credit score reports?
How to Check Business Credit Score: Your Fundability™ Will Thank You
Here’s the thing. While a lot of things affect the Fundability™ of your business, not all the things affect it equally. Truly, there are many pieces to the puzzle. Business credit is like one big piece that fits right in the middle. As a result, you have to know how to check it to get a feel for what is happening with your Fundability™.
How to Check Business Credit Score: Dun & Bradstreet
Basically, Dun & Bradstreet offers six different reports. For sure, the one utilized most often by lenders is the PAYDEX. Likely, this is due to the fact that it is the one most like the consumer FICO score. Similarly, it measures how quickly a company pays its debt on a scale of 1 to 100. Mostly, lenders like to see a score of 70 or higher.
To put it in perspective, a score of 100 reveals the firm makes payments ahead of time. A rating of 1 shows they pay 120 days late, or more.
Together with PAYDEX, they offer the following.
Delinquency Predictor Score
This rating determines the likelihood the company will not pay, will be late paying, or will come under bankruptcy. For scoring, the range is 1 to 5, with 2 being a good score.
Financial Stress Score
As you might imagine, this is a measurement of the stress on a firm’s balance sheet. It shows the possibility of shutting down within a year. The range is 1 to 5, and a 2 is good.
Supplier Evaluation Risk Rating
In contrast, this is a ranking that predicts odds of a firm surviving one year. It ranges from 1 to 9, with a 5 being a good score.
Credit Limit Recommendation
As the name implies, this is a recommendation for the amount of debt a company can handle. Financial institutions usually use it to establish how much credit to extend.
D&B Credit Rating
This is an estimation of overall business risk on a scale of 4 to 1, where a 2 is considered good. The smaller the number the better. The rating is given in conjunction with letters, the combination of which shows a company’s net worth.
Consequently, if there isn’t enough data on a company to give it a rating, an alternative score is assigned. This is called a credit approval score. It is based on the number of employees. They will use any data they have available to calculate this alternative rating. That means, a company can control this to a point by ensuring D&B has all of the information they need.
Commercial Credit Score
Along with the PAYDEX, Dun & Bradstreet releases a commercial credit report. It has three parts. Each shows how likely the business is to default on expenses or become seriously late on payments.
Commercial Credit Score
On a range of 101 to 670, the commercial credit score anticipates the likelihood of a firm making late payments. A rating of 101 indicates it is very likely that this will happen. Likewise, a score of around 500 is good.
Commercial Credit Percentile
For this, the scale goes from 0 to 100. It shows the chance of delinquency too. However, it determines this versus other companies in the Dun & Bradstreet system. A rating of 1 is the highest possible probability versus other companies. The majority of loan providers believe a rating of 80 or higher is good.
Commercial Credit Class
Basically, this is an way of dividing businesses into classes based on the chance of delinquency. Firms in class 1 are the least likely to be overdue. Likewise, if you are in class 2, that’s great.
How to Check Business Credit Score: Experian Business Credit Scores
Experian gathers data from a lot of the same sources as Dun & Bradstreet. As a result, their reports are similar. There are a few key differences in sources, calculation, and also presentation however.
For example, Experian uses the Intelliscore Plus credit score. It shows statistics-based credit risk. As a result, it is a highly predictive score that can help users make well-informed credit decisions.
The Intelliscore scores range from 1 to 100, with a higher score indicating a lower risk class.
Score Range Risk Class
Experian’s Blended Score
The blended score is a one-page report. It provides a summary of the business and its owner. A combined business-owner credit scoring model works better than a business or consumer only model. In fact, blended scores typically outperform consumer or business scores alone by 10 – 20%.
Experian Financial Stability Risk Score (FSR)
FSR predicts the potential of a business going bankrupt or not paying its debts. Consequently, this score identifies the highest risk businesses by using payment and public records. They look at a number of variables, some of which include:
- high use of credit lines
- severely late payments
- tax liens
- collection accounts
- risk industries
- length of time in business
How to Check Business Credit Score: The Equifax Service Credit Rating
Similarly, Equifax shows three different points on its corporate credit report. These include:
Equifax Payment Index
Similar to PAYDEX, Equifax’s payment index is a measurement on a scale of 100. It shows how many of your small business’s payments were made on time. Like the others, it uses data from both creditors and vendors. However, it’s not meant to anticipate future behavior. In fact, that is what the other two scores are for.
Equifax Credit Risk Score
This score shows the likelihood of your company becoming severely delinquent on payments. Scores range from 101 to 992 and include an evaluation of:
- Available credit limit on revolving credit accounts, including credit cards
- Company size
- Proof of any non-financial transactions that are late or were charged off for two or more billing cycles
- Length of time since the opening of the oldest financial account
Equifax Business Failure Score
Equifax’s business failure score takes a look at the risk of your business shutting down. It runs from 1,000 to 1,600 and bases its scoring on these factors:
- Total balance to total current credit limit in the past three months
- The amount of time since the opening of the oldest financial account
- Your small business’s worst payment status on all trades in the last 24 months
- Proof of any non-financial transactions (like merchant invoices) which are late or are on a charge off for two or more billing cycles
For the credit risk and the business failure scores, a rating of 0 means bankruptcy.
A positive Equifax score for your business is as follows:
- Payment Index 0 to 10
- Credit Risk score 892 to 992
- Business Failure score 1400 to 1600
Are These the Only Agencies That Issue Business Credit Reports?
In short, no. Actually, there are a lot of other agencies that will issue a business credit score. Furthermore, part of knowing how to check business credit score is knowing which company you need to check with. These, however, are known as the big three.
If you want to view your whole report, including your score, you can pay for a credit report. Since these are the most commonly used, you need one from each of them. Still, there has been an increase in the use of another option recently. It’s the FICO SBSS.
How to Check Business Credit Score: FICO SBSS?
First, the FICO SBSS is the business variation of your personal FICO credit report. However, unlike your personal FICO, the SBSS reports on a scale of 0 to 300. The higher the score the better. Still, the majority of loan providers demand a rating of least 160.
Exactly how is the FICO SBSS Scored?
Surprisingly, it is significantly different from other business credit scoring designs. For example, the SBSS utilizes your corporate credit score and individual credit rating. In addition, it makes use of monetary details like business assets and income. As you can see, the goal is to give an overall financial picture with one rating.
Business owners cannot access their FICO SBSS by themselves. There is a proprietary formula for score computations. FICO does not make that information public. The result is, you go into lending institutions blind as to what your FICO SBSS credit rating might be.
Furthermore, lenders can choose how certain factors are weighted in the computation of your score. This means your FICO SBSS could actually be different from one lender to the next. For example, one lender could put more weight on your business payment history, while another could lean more on your personal credit score.
What does all of this mean? It means that you actually cannot check your business credit score from FICO SBSS yourself. The best you can do is handle your credit responsibly and make sure the other aspects of fundability are in order. If all you put out there going forward is positive information, your FICO SBSS should follow suit and be positive as anything negative drops off over time.
How to Check Business Credit Score: Credit Monitoring
If you want to know how to check business credit score on an ongoing basis, credit monitoring is the answer. Typically, you can check your score at any time with a credit monitoring service. Each of the big three has one, but you certainly save money with a third-party business credit monitoring option. Also, you may be able to see your scores from more than one agency in one place.
How to Check Business Credit Score: What’s Important
Honestly, you have to know how to check business credit score. However, even more importantly, you need to know how it is calculated, what it tells lenders, and how to fix it if it isn’t good. Generally, high scores result in easier approval. So, if you do not have a high score, pay for a copy of your report and figure out why. Then, have mistakes corrected. If the probably is payment history, then start now paying your obligations on-time, regularly.
Of course, if you have yet to set up your business as an entity separate from you as the owner, then you likely don’t even have an actual business credit report. That’s right. Most likely everything is simply being reporting to your personal credit report. If you and your business share contact information and a bank account, and if you are not incorporated, this is likely the case. Get those things taken care of, and then you’ll be able to start the process of building business credit.