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What’s in a Company Credit Score

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

Do you know what’s in a company credit score? 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 determined now is a good time to start. Or maybe your business is reasonably new, and this is the first time you’re doing this. Regardless of your situation, you have most likely asked this question at least once – are my credit ratings any good?

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

Your Business’s Experian Commercial Credit Score

Experian’s Credit Score report includes things like a business credit score along with other data, including account histories, payment trends, and public records. Experian company credit scores run 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 variables that go into the calculation include:

  • Lines of credit your small business has applied for in the previous nine months
  • New lines of credit you’ve opened in the prior six months
  • Your company’s years in business
  • Payment history in the past twelve months
  • Lines of credit used in the prior six months
  • Collections amounts within the past seven years
  • Percent 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).

Typically, even businesses that use credit responsibly will get a medium-low risk rating. As might be expected, well-established companies will have a less complicated time attaining a low-risk rating.

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

Your Company’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 bureau or is reported to data-gathering businesses partnering with the agency. D & B uses this data, as well as a credit score and financial stress score, so as to advise just how much credit a creditor should extend to your company.

So as to get a PAYDEX number, you are required to file for a DUNS number by means of Dun & Bradstreet’s web site. The number is absolutely free. Plus the bureau will need to have reports of your payments with four or more vendors. Your company’s PAYDEX score reveals if your payments are typically made on schedule or ahead of schedule. As you might 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 business’s credit score ranges from 1 to 5. 1 is the best score. This matches your small business with other companies with comparable payment histories. The figure shows how often those small businesses tend to pay promptly. This information can help creditors to recognize your small business’s standing. However, it does not genuinely demonstrate all of the payment data from your company.

The financial stress score also runs from 1 to 5. This score matches your business with other businesses sharing comparable financial and business characteristics. These similarities are in areas like size or amount of time in business. This score demonstrates how frequently those companies tend to pay on time. As before, 1 is the best score. This rating is a broader look at the business landscape, versus an analysis of your company’s true payment history.

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

Your Business’s Equifax Score

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

Similar to the PAYDEX score, Equifax’s payment index, which is measured on a scale of 100, demonstrates how many of your business’s payments were made in time. These include both information from creditors and vendors. Nevertheless, it’s not designed to anticipate future conduct, which is what the other two scores are for.

Equifax’s credit risk score checks 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 business size.
  • Proof of any non-financial transactions (e. g. vendor invoices) which are unpaid 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 takes a look at the chance of your business closing. It ranges from 1,000 to 1,600, appraising these aspects:.

  • Total balance to total current credit limit average utilization in the prior three months.
  • How long since the oldest financial account was opened.
  • Your company’s worst payment status on all trades in the previous 24 months.
  • Documentation 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 score of 0 means bankruptcy.

A good Equifax score for your business is as follows:

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

Keep your numbers up and good things will happen.

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