How to Improve Business Credit Score

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How to Improve Business Credit Score

Published By Janet Gershen-Siegel at April 28, 2018

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Do you know how to improve business credit score? Does your small business have a good business credit score? Is there room for improvement?

So you are currently in business, and you are striving to keep on top of your company credit scores. Or perhaps you aren’t, and have determined now is a good time to start. Or maybe your company is fairly new, and this is the very first time you’re doing this. Despite your scenario, you have probably asked this question at least once — are my credit scores any good?

Let’s check out at the three business credit reporting agencies and solve this mystery at last.

Your Small Business’s Experian Business Credit Score

Experian’s Credit Score report includes a business credit score plus additional information, such as account histories, payment trends, and public records. Experian business credit scores range from 1 to 100. Unlike Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian takes into account numerous factors, and not just payment histories. The variables that go into the calculation include:

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

Ordinarily, even companies which use credit conscientiously will get a medium-low risk rating. As might be expected, well-established companies will have a less complicated time attaining a low-risk rating.

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

Your Company’s PAYDEX Score

Dun & Bradstreet’s PAYDEX score ranges from 0 to 100. A PAYDEX score is based upon payment records which is either reported to the credit reporting agency or is reported to data-gathering companies partnering with the credit reporting agency. D & B uses this data, in addition to a credit score and financial stress score, so as to advise how much credit a lender should extend to your business.

So as to get a PAYDEX number, you are required to file for a DUNS number by means of Dun & Bradstreet’s website. The number is free of charge. In addition the credit reporting agency needs to have records of your payments with four or more merchants. Your small business’s PAYDEX score indicates if your payments are normally made in a timely manner or ahead of schedule. As you might expect, a higher number is better. The scores break down 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 company’s credit rating runs from 1 to 5. 1 is the best score. This matches your small business with other companies with similar payment histories. The figure demonstrates how frequently those companies tend to pay timely. This information can really help lenders to comprehend your business’s standing. However, it does not really reflect all of the payment records from your business.

The financial stress score also runs from 1 to 5. This score matches your business with other companies sharing similar financial and business characteristics. These similarities are in areas like size or amount of time in business. This score shows how frequently those comparable businesses tend to pay on time. As before, 1 is the best score. This rating is a broader evaluation of the business landscape, versus an analysis of your business’s genuine payment history.

A good PAYDEX score for your small business is 80-100.

Your Business’s Equifax Score

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

Similar to the PAYDEX score, Equifax’s payment index, which is gauged on a scale of 100, demonstrates how many of your small business’s payments were made on time. These include both records from creditors and vendors. However, it’s not designed to predict future activity, which is what the other two scores are for.

Equifax’s credit risk score assesses how likely it is your company will become severely delinquent on payments. Scores range from 101 to 992, and they evaluate:

  • Available credit limit on revolving credit accounts, e. g. credit cards.
  • Your company size.
  • Evidence of any non-financial transactions (e. g. vendor invoices) which are late or were charged off for two or more billing cycles.
  • Amount of time since the oldest financial account was opened.

Lastly, Equifax’s business failure score looks at the risk of your company shutting down. It runs from 1,000 to 1,600, judging these factors:.

  • Total balance to total current credit limit average utilization in the most recent three months.
  • The length of time since the oldest financial account was opened.
  • Your business’s worst payment status on all trades in the last 24 months.
  • Evidence of any non-financial transactions (e. g. vendor invoices) which are late or have been charged off for two or more billing cycles.

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

A decent 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. Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

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