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What is the Credit Score of a New Business

Published By Janet Gershen-Siegel at January 12th, 2018

Do you know what the credit score is for a new business? Even if your company is brand new, you might still have a credit score. And it’s probably terrible.

So you are presently in business, and you are striving to keep on top of your commercial credit scores. Or possibly you are not, and have decided now is a good time to start. Or perhaps your company is somewhat new, and this is the first time you’re doing this. Irrespective of your circumstance, you have most likely asked this question at least once – are my new business credit scores any good?

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

Your Company’s Experian Commercial Credit Score

Experian’s Credit Score report includes a small business credit score plus other details, including account histories, payment trends, and public records. Experian business credit scores range from 1 to 100. In Contrast To Dun & Bradstreet’s PAYDEX score and Equifax’s payment index, Experian takes into account a variety of factors, and not merely payment histories. The details which go into the calculation include:

  • Lines of credit your company has applied for in the last nine months
  • New lines of credit you’ve opened in the past six months
  • Your company’s years in business
  • Payment history in the most recent twelve months
  • Lines of credit used in the last six months
  • Collections totals within the prior seven years
  • Percent of available credit being used
  • Amount 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 greater than 30 days).

Ordinarily, even businesses that use credit conscientiously 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 good Experian score for your company is 76-100.

Your Company’s PAYDEX Score

Dun & Bradstreet’s PAYDEX score runs from 0 to 100. A PAYDEX score is based on payment details which is either reported to the bureau or is reported to data-gathering firms partnering with the bureau. D & B uses this data, alongside a credit score and financial stress score, in order to recommend how much credit a lender ought to extend to your company.

So as to get a PAYDEX score, you are required to file for a DUNS number via Dun & Bradstreet’s website. The number is absolutely free. In addition the bureau must have records of your payments with four or more merchants. Your small business’s PAYDEX score indicates if your payments are usually made punctually or ahead of schedule. As you may 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 score ranges from 1 to 5. 1 is the best score. This matches your business with other businesses with similar payment histories. The number demonstrates how often those businesses tend to pay promptly. This information can really help lenders to grasp your business’s standing. However, it does not truly show all of the payment records from your business.

The financial stress score also runs 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 demonstrates how often those small businesses tend to pay on time. As before, 1 is the best score. This rating is a more comprehensive look at the business landscape, as opposed to an analysis of your business’s genuine payment history.

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

Your Small 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.

Much like 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 promptly. These include both records from creditors and vendors. However, it’s not designed to anticipate future activity, which is what the other two scores are for.

Equifax’s credit risk score assesses 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 company size.
  • Proof of any non-financial transactions (e. g. merchant invoices) which are late or were charged off for two or more billing cycles.
  • Length of time since the oldest financial account was opened.

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

  • Total balance to total current credit limit average utilization in the last three months.
  • How long since the oldest financial account was opened.
  • Your small business’s worst payment status on all trades in the last 24 months.
  • Confirmation of any non-financial transactions (e. g. merchant invoices) which are delinquent 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 great Equifax score for your company is as follows:

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

Keep your new small business credit scores up and good things will happen.

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