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What Goes Into the Calculation of Business Credit? The Secret, Unveiled

Published By Janet Gershen-Siegel at October 24th, 2017

Behind the Scenes: What Goes Into the Calculation of Business Credit

You may have been asking yourself just what goes into the calculation of business credit.  Or you need to know what has an effect on company credit score. Well not to worry, as here are all the specifics for anybody questioning just exactly how a business credit score works.

Does your small business have a terrific business credit score? Or it is any good at all?

So you are currently 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 small business is reasonably new, and this is the very first time you’re doing this.

Irrespective of your circumstance, you have most likely asked this question at least once. Are my credit ratings any good?

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

The Calculation of Business Credit: The Credit Reporting Agencies

There are three significant credit reporting agencies and they all determine your score slightly differently. While most of the concepts are the same, the emphasis put on each variable varies.

This is the reason why you at times see variations in credit scores depending upon who’s doing the reporting. So long as there are no errors on the report, the numbers should be similar. But they are not necessarily going to be identical.

The Calculation of Business Credit: Dun & Bradstreet (PAYDEX)

D & B makes a number of proprietary computations to attempt to determine whether your company can pay its invoices.

One of these is the Financial Stress Scores, which is an attempt to predict how likely it is your business will fail in the next twelve months. Business failure is defined as: you get legal relief from your creditors (often, that’s bankruptcy).

Or you stop all of your business operations without totally paying all of your creditors.

Another possibility is you willingly withdraw from your small business operations and because of this you leave past due obligations. Or you enter into business reorganization or receivership. And yet another option is you make a plan for the benefit of your creditors.


Dun & Bradstreet’s scores extend from 1,001 to 1,875. A score of 1,001 represents the highest chance while a figure of 1,875 shows the lowest chance of business failure.

The PAYDEX Score, in contrast, serves as Dun & Bradstreet’s dollar-weighted review of how your business has paid its invoices during the past year. D & B bases this score on trade experiences as reported by a variety of vendors.

The D & B PAYDEX Score runs from 1 to 100. As you might expect, higher scores mean a better payment performance.

Your Company’s PAYDEX Score

Dun & Bradstreet’s PAYDEX score ranges from 0 to 100. A PAYDEX score has a basis in payment information which is on report to the CRA. Or it is on report to data-gathering businesses partnering with the bureau.

D & B uses this information, along with a credit score and financial stress score, in order to advise how much credit a lender ought to extend to your company.

Learn more here and get started with building business credit with your company’s EIN and not your SSN.

Getting a PAYDEX Score

So as to generate a PAYDEX number, you must file for a DUNS number via Dun & Bradstreet’s web site. The number is absolutely free. Plus the bureau must have records of your payments with four or more merchants.

Your company’s PAYDEX score reveals if your payments are normally made punctually or ahead of schedule. As you may expect, a greater number is better.

PAYDEX Score Details

The scores work out as follows:

  • 80-100: A low risk of late payments
  • 50-79: A medium risk of late payments
  • 49: A high risk of late payments

Business Credit Score

Your small business’s credit score ranges from 1 to 5. 1 is the best score. This matches your business with other companies with comparable payment histories. The number demonstrates how frequently those small businesses tend to pay timely.

This data can help credit issuers to understand your business’s standing.

But it does not really 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 comparable financial and business qualities.

These similarities are in areas like size or amount of time in business. This score shows how often those small 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 company’s authentic payment history.

An epic PAYDEX score for your business is 80-100.

The Calculation of Business Credit: Your Business’s Equifax Score

A few of the more vital pieces of data Equifax looks into are credit usage, public records, and how your small business deals with its financial and non-financial accounts. Removing debts as promptly as possible and not going delinquent.

And always keep your company’s credit utilization reasonable (use no more than 30% of your total available credit for best results).

Also,  steer clear of tardy payments. Then you should have a good Equifax score.


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

Equifax Payment Index

Similar to the PAYDEX score, Equifax’s payment index, which has its measurement on a scale of 100, shows how many of your small business’s payments were made on schedule. These include both information from credit issuers and vendors.

But it’s not meant to predict future behavior. That is what the other two scores are for.

Equifax Credit Risk Score

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

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

Equifax Business Failure Score

Lastly, Equifax’s business failure score looks at the risk of your business closing. It ranges from 1,000 to 1,600, evaluating these aspects:

  • Total balance to total current credit limit average utilization in the last three months
  • How much time since the opening of the oldest financial account
  • Your business’s worst payment status on all trades in the previous 24 months.
  • Proof of any non-financial transactions (e. g. merchant invoices) which are late or have been on charge off for two or more billing cycles.

Learn more here and get started with building business credit with your company’s EIN and not your SSN.

Equifax Scoring Analysis

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

An awesome Equifax score for your company is as follows:

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

Keep your numbers in line and good things will happen.

The Calculation of Business Credit: Your Business’s Experian Commercial Credit Score

The same as Equifax and Dun & Bradstreet, Experian looks into not only the amount of credit you are using, but also how quickly your company is paying off its financial obligations.

Experian also reviews bankruptcies, and judgments or liens against your business, and any UCC filings. Experian also investigates any tax liens against your business.

They also derive some of their scoring on the amount of time your business has been in business and how long your company has had an Experian listing. The longer that is, then the better.

Experian’s Credit Score report includes things like a business credit score along with additional information, 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 takes into consideration various factors, and not simply payment histories.

Experian Scoring Factors

The variables that go into the calculation include:

  • Lines of credit your small business has an application for in the previous nine months
  • New lines of credit you’ve begun in the previous six months
  • Your business’s years in business
  • Payment history in the prior twelve months

More Experian Scoring Factors

  • Lines of credit in use in the prior six months
  • Collections amounts in the previous seven years
  • Percent of available credit in use
  • Number of payments one – 30 days overdue, or 31 days or more late
  • Amount of non-net-30 lines of credit (that means the payment is due in fewer or more than 30 days).

So commonly, even companies that use credit sensibly will get a medium-low risk rating. Also, as you might expect, older businesses will have a much easier time acquiring a low-risk rating.

Hence an epic Experian score for your company is 76-100.

Learn more here and get started with building business credit with your company’s EIN and not your SSN.

The Calculation of Business Credit: Takeaways

So for all of the large credit reporting bureaus,  the particulars may be balanced a little differently. But the bottom line is that they are all evaluating how reliably your company employs credit.

Do you pay your bills in a timely manner or in advance, and in full? Then your score will be a lot better.


Do you use so much credit that your company has trouble paying it off on time? Or do accounts go to collections? Then your score will be worse. Judgments and liens will also adversely affect your score; more responsible time in business will favorably affect it.

Keep on using credit responsibly. And your small business’s credit score is bound to be a good one and stay that way.

Discover this new way to understand the calculation of business credit.

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