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Your Question: What is a Business Credit Score?

Published By Janet Gershen-Siegel at May 28th, 2018

Do You Know Your Business Credit Score?

Written by Janet Gershen-Siegel

What is a business credit score? How are company credit scores calculated? What is a startup business credit score?

So you are currently in business, and you need to know, what is a business credit score? 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 very first time you’re doing this. Despite your circumstance, you’ve most likely asked this question at least once — are my credit scores any good?

Let’s take a look at the three commercial credit reporting agencies and solve this mystery at long last.

Your Company’s Experian Company Credit Score

Experian’s Credit Score report includes things like a company credit score as well as other facts, including account histories, payment trends, and public records. Experian commercial credit scores run from 1 to 100. Unlike Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian takes into consideration numerous factors. So they don’t just look at payment histories. The details which go into the calculation include:

  • Lines of credit your small business has applied for in the previous nine months
  • New lines of credit opened in the last six months
  • Time in business
  • Payment history in the last twelve months
  • Lines of credit used in the previous six months
  • Collections amounts within the prior seven years
  • Percentage of available credit in use
  • Amount of payments one – 30 days overdue, or 31 days or more overdue
  • Number of non-net-30 lines of credit (that means the payment is due in less or more than 30 days).

Ratings

Ordinarily, even small businesses which use credit responsibly will get a medium-low risk rating. As might be expected, well-established businesses will have a less complicated time getting a low-risk rating.

A great Experian score for your small business is 76-100.

Your Small Business’s PAYDEX Score

Dun & Bradstreet’s PAYDEX score ranges from 0 to 100. A PAYDEX score is based upon payment details which is either reported to the bureau or is reported to data-gathering firms partnering with the agency. D & B uses this data, as well as a credit score and financial stress score, to advise how much credit a lender ought to extend to your company.

In order to get a PAYDEX score, you are required to file for a DUNS number by way of Dun & Bradstreet’s web site. The number is absolutely free. In addition the CRA needs to have records of your payments with four or more merchants.

What Does a PAYDEX Score Mean?

Your business’s PAYDEX score indicates if your payments are commonly made without delay 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.

Your company’s credit rating runs from 1 to 5. 1 is the best score. This matches your business with other companies with similar payment histories. The figure demonstrates how often those companies tend to pay without delay. This information can help lenders to grasp your business’s standing. However, it does not genuinely show all of the payment data from your business.

Financial Stress Score

The financial stress score also ranges from 1 to 5. This score matches your company with other businesses sharing similar financial and business attributes. These similarities are in areas such as size or amount of time in business. This score shows how frequently those companies tend to pay on time. As before, 1 is the best score. This rating is a broader evaluation of the business landscape, as opposed to an analysis of your small business’s authentic payment history.

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

Your Small Business’s Equifax Score

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

Similar to the PAYDEX score, Equifax’s payment index, with a scale of 1 – 100, shows how many of your company’s payments were on time. These include both records from creditors and vendors. However, it won’t anticipate future activity, which is what the other two scores are for.

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

  • Available credit limit on revolving credit accounts, e. g. credit cards.
  • Your business size.
  • Proof of any non-financial transactions which are unpaid or were charged off for two or more billing cycles.
  • Length of time since the opening of the earliest financial account.

Equifax Business Failure Score

Lastly, Equifax’s business failure score looks at the possibility of your small business shutting down. It runs from 1,000 to 1,600, and has these elements:

  • Total balance to total current credit limit average utilization in the past three months.
  • How much time since the opening of the oldest financial account.
  • Your small 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 overdue or have been charged off for two or more billing cycles.

So for the credit risk and the business failure scores, a score of 0 means bankruptcy.

A good Equifax score for your small business is as follows:

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

Keep your business credit score numbers in line and good things will happen. Learn more here and get started toward building business credit.

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