Business Credit Scores: How Do They Work?

Businesses, just like individuals, can be issued credit scores. These numbers go on to determine a company’s credit worthiness – that is, its ability to pay back loans. Having a good credit score can help your company qualify for a great business credit card, loan, or term financing – all of which can help improve your cash flow and expedite growth. Small business credit scores are predominantly issued by 1 of 4 major reporting agencies - Dun & Bradstreet, Experian, Equifax, and FICO. This guide will help you understand what factors drive each of the different business credit scores, and how you can improve your company's standing.

Business Credit Scores Explained

Each of the different business credit reporting agencies has a different scale and methodology powering their score. All of these different credit scores rely heavily on the payment history a company has with its previous suppliers, creditors, and lenders. As a rule of thumb, having records of timely payments will help establish a good score.

The chief purpose of these scores is to have a measure of your company’s financial stability. That is why good, steady and organized balance sheets tend to correspond with high scores. On top of this, things like the size and age of your company, or its credit history, may also play a pivotal role. If are set on improving your businesses credit score, you should make sure you get these fundamentals down first. Afterwards, you may look at the individual reporting agencies, in order to fine-tune and optimize your credit score, based on the different factors each of them considers. The table below gives a brief overview of the major reporting agencies, so that you may compare them at a glance.

Score PAYDEX Intelliscore Plus℠  Equifax Business Credit Report FICO® SBSS℠ Score
Range 0 to 100 0 to 100 Not a single number 0 to 300
Major Determining Factors
  • Promptness of payments to creditors
  • Payment History
  • Frequency of deragetory marks (collections, liens, etc.)
  • Credit Utilization
  • Company Size
  • Age of credit
  • Credit Limit
  • Age of business
  • Number of employees
  • Revenue & Assets
  • Personal Credit History
  • Data From Other Business Credit Reporting Agencies
Resources Sample Report Sample Report Sample Report Sample Report (Requires Registration)

Which type of business credit score a lender picks is up to them. The answer will almost always depend on the level of information a lender may way to get about your business. While a FICO SBSS score is most detailed for example, it may also be more costly.

Dun & Bradstreet: PAYDEX

Dun & Bradstreet’s PAYDEX score (sometimes referred to as D&B PAYDEX) is perhaps one of the simples business credit scoring models, as it relies solely on the promptness of payments. This score examines your average time (in days) to pay off a debt, relative to the outlined terms. A score of 100 means that, on average, you have paid your bills 30 days or more, before they were due. If you pay it the day it is due, that corresponds to a score of 80.  The longer you take to pay off your debts, the worse your score will become.

As prerequisite to receiving a D&B PAYDEX score, you must register for a D-U-N-S Number. This requires signing your business up with Dun & Bradstreet, and submitting financial and payment information to them. The D-U-N-S Number is simply a unique ID for your business, which will allow creditors and lenders to look it up in their database. A PAYDEX score will be generated after your company submits at least 4 payment experiences, after getting the D-U-N-S.

Experian Intelliscore Plus℠

Experian’s Intelliscore ranges from 0 (high risk) to 100 (low risk). Unlike the D&B score, Experian’s business credit score doesn’t reward prompt payments – it only considers whether payments are made on time or not. Outside of that, it also examines how a company has handled credit in the past, looking at things such as average credit utilization (how much of your available credit you use), as well as the frequency of any derogatory marks towards your account (payment delinquency, collections, liens, etc.).

Experian’s report will let your creditor know whether you have filed for bankruptcy, had any judgments against you, or had tax liens filed against you. It is a much more  detailed than a PAYDEX score in that way.

Equifax Business Credit Reports

Equifax is unique in that it assigns your company 3 different scores, inside of a single report. The first is a traditional credit risk score (range: 100 to 992), which analyzes your company’s credit history – credit utilization, past delinquencies, length of credit history, and the like. Secondly, the Equifax report contains a “Payment Index” (range: 0 to 100). This is a measure of your payment history to past creditors. A score of 90+ indicates that, on average, the company paid its bills on time. 

Finally, Equifax issues a “Business Failure Score” (range: 1,000 to 1,880), which asses the risk of a company going under and dissolving. In order to maintain a good score, your company should have an old financial account opened, suggesting it has been around for a long time.

FICO Small Business Credit Score

A businesses’ FICO score can range from 0 to 300, and takes into account a huge amount of data – working in conjunction with companies like Equifax and Experian to come up with a comprehensive report on your business. Furthermore, FICO business credit scores allow a lender to look at personal credit scores as well, assessing the credit worthiness of the individuals who are running the business. When retrieving a score from FICO’s system, the lender has the ability to choose how much weight is placed in a personal score versus that of the business. This can be good for young and small companies, which do not have a long and established credit history.

FICO SBSS scores are used by large banks, such as KeyBank, PNC, HSBC, and more, to issue term loans up to $1 million, and leasing transactions up to $250,000.

FICO is one of the newest companies to offer business credit scores – as it has been traditionally best known for its consumer credit scoring. As such, fewer institutions look to this method of assessing a businesses’ credit worthiness, though it is likely to change in years to come. FICO offers one of the most refined tools of measuring a businesses’ likelihood to pay back debts and loans. It also offers a lot more customization than the previously discussed products.

How to Check Your Business Credit Score?

If you wish to obtain a credit score or report from any of the above companies, you will generally need to pay for the information. With some, such as D&B, your first report may be free, as long as you sign up for a D-U-N-S number in the process. We recommend contacting a sales representative at these companies, and seeing if you can qualify for a free report.

Be wary of websites and services to claim to offer you “free reports”. They could be a scam, looking to steal your information. Always check with the sources directly (i.e. one of the credit reporting agencies talked about above).

Why Checking Your Business’ Credit Score Matters

Reporting agencies have been known to make mistakes. Like with personal FICO scores, information may be misattributed, or a simple clerical error on somebody’s part could always happen. You are the only person who is likely to see an error and be able to call it out.

If an error on your credit report goes unchecked, lenders and creditors may deny you a claim as a result. Luckily, you only need to notice an error in 1 spot. If some database is misattributing information, you can report it to D&B and they are obligated to investigate. If it is found that there is indeed an error, all other reporting agencies that rely on the database will be notified and are also obligated to respond.

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