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How to Improve Your Business Credit Rating

Published By Janet Gershen-Siegel at June 22nd, 2018

We Can Show You How to Improve Your Business Credit Rating

Are you looking for how to improve your business credit rating? We can help.

Written by Janet Gershen-Siegel

Do you know how to improve your business credit rating? But first – does your business have a good business credit rating, or any rating at all?

So you are presently in business, and you are striving to keep on top of your business credit scores. Or perhaps you aren’t, and have decided now is a good time to start. Or maybe your company is fairly new, and this is the first time you’re doing this. Whatever your circumstance, you’ve most likely asked this question at least once — are my credit ratings any good?

Let’s have a look at the three commercial credit reporting bureaus and solve this mystery once and for all.

Your Business’s Experian Business Credit Rating

Experian’s Credit Score report includes things like a commercial credit score plus other data, such as account histories, payment trends, and public records. Experian company credit scores run the gamut from 1 to 100. In Contrast To Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian considers a number of factors, and not merely payment histories. The aspects that go into the calculation include:

  • Lines of credit your small business has applied for in the most recent nine months
  • New lines of credit you’ve launched in the past six months
  • Your small business’s years in business
  • Payment history in the previous twelve months
  • Lines of credit used in the past six months
  • Collections amounts within the previous seven years
  • Percentage of available credit being used
  • 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).

Often, even companies that use credit sensibly will get a medium-low risk rating. As might be expected, well-established businesses will have a much easier time attaining a low-risk rating.

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

Your Business’s PAYDEX Score

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

However, to have a PAYDEX number, you are required to file for a DUNS number by means of Dun & Bradstreet’s website. The number is free. Plus the CRA must have records of your payments with four or more vendors. Your business’s PAYDEX score shows if your payments are normally made on schedule or ahead of schedule. As you might expect, a greater number is better. 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.

D&B Scores

Your small business credit rating runs from 1 to 5. 1 is the best score. This matches your business with other small businesses with comparable payment histories. The figure reveals how frequently those companies tend to pay punctually. This information can really help creditors to recognize your business’s standing. However, it does not genuinely show all of the payment information from your business.

The financial stress score also runs from 1 to 5. This score matches your company with other small businesses sharing comparable financial and business characteristics. These similarities are in areas such as size or amount of time in business.

Also, this score shows how often 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 authentic payment history.

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

Your Small Business’s Equifax Score

Equifax displays three distinct business determinations on its commercial 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 has measurements on a scale of 100, demonstrates how many of your business’s payments were on time. These include both data from creditors and vendors. Nevertheless, it won’t anticipate future conduct, which is what the other two scores are for.

Equifax Credit Risk Score

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

  • Available credit limit on revolving credit accounts, e. g. credit cards.
  • Your business 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 opening of the oldest financial account

Equifax Business Failure Score

Finally, Equifax’s business failure score looks at the chance of your small business closing. It runs from 1,000 to 1,600, evaluating these factors:

  • Total balance to total current credit limit average utilization in the last three months.
  • How long since the opening of the earliest financial account.
  • Your small business’s worst payment status on all trades in the most recent 24 months.
  • Documentation of any non-financial transactions (e. g. merchant 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.

Therefore, a decent Equifax score for your company is as follows:

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

Keep your scores in line and good things will happen to your business credit rating. Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

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