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The Fair Isaac Corporation (FICO) is most commonly associated with personal credit scores, but it also issues a small business credit score, the Small Business Scoring Score (SBSS), that is widely used by the SBA, banks and other lenders. The FICO SBSS ranges from 0 to 300, with lenders typically preferring minimum scores of 140 to 180.
What Goes Into FICO SBSS?
FICO collects data from major consumer and business credit reporting bureaus and also looks at the documentation you submitted to your lender. FICO weighs a variety of factors when generating your business’s score, but the company doesn’t disclose how important each factor is in its model.
Personal and Business Credit History
FICO will look at personal and business credit scores and history across other major credit bureaus, such as Dun & Bradstreet, Experian and Equifax. The reason FICO looks at both personal and business credit history is that small business owners are frequently viewed as inseparable from their small businesses. That’s to say that if a small business owner(s) can manage her personal finances well, she’s likely to manage her business’s well. Moreover, FICO will consider the personal credit history of all owners/principals of the business.
Experian, Equifax and Dun & Bradstreet all heavily weigh your business’s payment history, and because FICO pulls business credit scores from these bureaus, payment and trade history with suppliers and vendors will be an important part of your business’s FICO SBSS score. This means that paying your vendors and creditors on time will have a positive impact on your score.
Business Financials and Firmographics
Your business’s financials will also play a significant role in your FICO SBSS score. FICO will evaluate your company’s assets and liabilities, cash flow and revenue among other pieces of information. While FICO does not disclose specifics about how this information is used or weighted in their model, having positive working capital, positive cash flow and strong revenue will help your score. FICO also considers your time in business when generating your score. Business owners with no business credit history and limited time in business will only be able to receive a maximum score of 140, and that’s only if you have a stellar personal credit history and a financially sound business. In addition, the size of your business won't have a significant impact on your score, as a one-person company could have the same score as a company with 100 employees.
Like the other major credit bureaus, FICO will also factor any judgments, liens or other derogatory marks against your business into its score. The best scenario for your business is to not have any, but if your business does, it is better if judgments or liens are not recent or consistent and if the dollar amount associated with each is low.
What Do Different Scores Mean?
Unlike the personal FICO score, the FICO SBSS score ranges from 0 to 300, with scores above 140 to 180 being considered good to excellent. While FICO launched the SBSS score in 1993, it didn’t start gaining widespread traction until the Small Business Administration began using it for its 7(a) loan program in 2014. For 7(a) loans (including Express and Export Express loans) up to $350,000, the SBA looks for a minimum SBSS score of 140, but generally prefers score of at least 160. Since the SBA started using the score, other traditional and alternative lenders, such as PNC Bank and HSBC, have followed suit. However, many lenders prefer to have borrowers with scores of at least 160 to 180.
Where to Get Your FICO SBSS Score
Your business’s FICO SBSS score is generated when you apply for a loan. Your lender will send your documents and information to FICO, and FICO will collect additional data from the credit reporting agencies (Equifax, Dun & Bradstreet, Experian). This information is loaded into FICO’s LiquidCredit decision engine to come up with a score for your business. This score will be sent to your lender along with a detailed credit report. The best way to ensure that your FICO SBSS Score is accurate is to check your business and personal credit scores and reports at other bureaus. This means checking your Dun & Bradstreet Paydex Score, Experian Intelliscore Plus and Equifax Business Credit Report as well as your personal FICO score. If you see any incorrect information on these reports, be sure to report it to the appropriate credit bureau.