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What Affects Your Business Credit Scores

Published By Janet Gershen-Siegel at May 25th, 2018

What Affects Business Credit Scores

What affects business credit scores? So you are presently in business, and you are striving to keep on top of your small business credit scores. Or possibly 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. Regardless of your conditions, you have most likely asked this question at least once – are my credit scores any good?

Let’s check out at the three commercial credit reporting bureaus and solve this mystery at long last.

Your Business’s Experian Commercial Credit Score

Experian’s Credit Score report includes a commercial credit score along with additional data, including account histories, payment trends, and public records. Experian commercial credit scores run the gamut from 1 to 100. In contrast to Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian considers numerous factors, and not simply payment histories.

The elements which go into the calculation include:

  • Lines of credit your small business has applied for in the prior nine months
  • New lines of credit you’ve launched in the past six months
  • Your company’s years in business
  • Payment history in the last twelve months
  • Lines of credit used in the most recent six months
  • Collections totals in the previous seven years
  • Percent of available credit being used
  • Amount 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 businesses which use credit responsibly 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.

swatch - What Affects Your Business Credit Scores

Your Business’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 businesses partnering with the agency. D & B uses this information, along with a credit score and financial stress score, so as to advise how much credit a lender should extend to your business.

In order to generate a PAYDEX score, you are required to file for a DUNS number by way of Dun & Bradstreet’s website. The number is free of charge. In addition the CRA needs to have reports of your payments with four or more merchants. Your business’s PAYDEX score shows if your payments are often on schedule or ahead of schedule. As you might expect, a higher number is better.

D&B Scores

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 small business’s credit rating runs from 1 to 5. 1 is the best score. This matches your company with other small businesses with similar payment histories. The score reveals how frequently those companies tend to pay timely. This information can really help creditors to grasp your company’s standing. Having said that, it does not really reflect the payment information from your small business.

So the financial stress score also runs from 1 to 5. This score matches your company with other companies sharing comparable financial and business characteristics. These similarities are in areas such as size or amount of time in business. This score demonstrates how often those companies tend to pay on time. As before, 1 is the best score. Hence this rating is a broader evaluation of the business landscape. And that is versus an analysis of your company’s genuine payment history.

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

Your Business’s Equifax Score

So Equifax displays three separate 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 a scale of 100, demonstrates how many of your business’s payments were on time. These include both information from creditors and vendors. Nevertheless, it’s not designed to predict future behavior, which is what the other two scores are for.

Equifax Credit Risk Score

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

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

Equifax Business Failure Score

Finally, Equifax’s business failure score looks at the possibility of your company closing. So it ranges from 1,000 to 1,600, assessing these factors:.

  • Total balance to total current credit limit average utilization in the prior three months.
  • How long since the opening of the earliest financial account.
  • Your small business’s worst payment status on all trades in the past 24 months.
  • Also, Evidence of any non-financial transactions (e. g. vendor invoices) which are overdue 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.

Hence a decent Equifax score for your business is as follows:

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

Takeaways – What Affects Business Credit Scores

So keep business credit scores 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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