Basics of a Business Credit Score
Written by: Kristy Welsh
Last Updated: May 9, 2016
Business credit scores are similar to consumer credit scores, only instead of measuring personal creditworthiness, business credit scores measure a company’s creditworthiness. Business credit is also referred to as commercial credit or trade credit.
Who Generates Business Credit Scores?
Just as with consumer credit reporting bureaus, there are numerous agencies engaged in business credit reporting. However, there are only three or four that generate the majority of business credit scores:
- Dun & Bradstreet’s PAYDEX score
- Experian’s Intelliscore Plus
- Equifax’s Business Credit Risk Score and Business Failure Score
- FICO’s LiquidCredit Small Business Scoring Service (SBSS)
What Determines a Business Credit Score?
Each of the business credit reporting agencies has its own proprietary formula for determining scores. Generally speaking, though, many of the same factors that determine a consumer credit score impact your business credit as well, including your company’s:
- Payment history
- Credit utilization ratio
- Length of credit history
- Unpaid debts
- Public records
Additionally, there are other determining factors unique to the business credit score, like the size of your company, how long you’ve been in business, and industry risk.
So, with each credit bureau using a different formula, each bureau will likely have a different score for you. This is further affected by the fact that not all of the bureaus will necessarily have the same information about your company.
How Will a Good Business Credit Score Help Me?
The better your business credit score, the more likely your business can get:
- Approved for credit without having to give a personal guarantee
- Higher credit limits
- Lower interest rates
- Better business insurance premiums
What is a Good Business Credit Score?
It depends on the agency. For example, a low risk (i.e., Excellent) business credit score for Dun & Bradstreet is between 80 and 100. For Experian, it’s between 76 and 100. For FICO, the minimum score to pass the SBA pre-screen process is 140.
How Do I Build My Business Credit Score?
Much the same way you do your consumer credit score:
- Make payments on time (or early, which garners the highest business credit scores)
- Keep your credit utilization ratio low
- Maintain different types of business credit (e.g., credit cards, loans, trade lines)
- Establish credit and trade lines with creditors, lenders, and vendors that report to the business credit bureaus
- Keep your personal credit in good shape, too
Can Business Credit Affect My Personal Credit?
Maybe. Theoretically, your business credit history should not end up on your personal consumer credit report. The exception would be if you were extended credit for your business by making a personal guarantee, meaning that in the event the business cannot make payments on the debt, you agree to be personally responsible for them. If you fail to do so, then that negative payment history will likely end up on your personal credit reports.
Can Personal Credit Affect My Business Credit?
Yes. FICO’s LiquidCredit combines your business and personal credit history.
Who Can Pull My Business Credit Reports?
Anyone. Business credit reports are available to the public, and anyone can purchase them for a fee.
What’s Included in My Business Credit Reports?
It varies by bureau, but generally includes your business credit score, as well as the credit summary your score is based on.
Can I Use Business Credit to Get a Loan, Without Relying on My Personal Credit?
It depends. If you’ve been in business for years and already have a strong business credit score, you likely don’t need to rely on your consumer credit score. But if your business is young or just getting started, you’ll likely need to rely on the depth and strength of your personal credit.
How Do I Get Copies of My Business Credit Reports?
Unlike your consumer credit reports, you are not entitled to free copies of your business credit reports every year. To see them, you’re going to have to pay for them. The only exception to that is if your business is denied credit. In that case, you are entitled to see (for free) the report that the lender or creditor based its decision on.
You can purchase three of your business credit reports directly through the reporting bureau websites – Dun & Bradstreet, Equifax, Experian. Or, you can go through credit monitoring service, Nav, and purchase all of them as a package deal. In fact, it is only in one of these packages that you purchase your FICO LiquidCredit or SBSS, as FICO evidently does not make it directly available any other way.
What Type of Negative Information Can Appear on My Credit Reports?
You can see many of the same types of negatives as on a consumer credit report – collections, tax liens, judgments, and bankruptcies. But you can also see negatives unique to business credit reports – trade data; UCC filings; and bank, government, and leasing data.
What if There is An Error on My Business Credit Report?
Do the same thing you would when you find an error on your consumer credit reports – notify the credit reporting agency.
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