Just like people, businesses have credit scores too! These scores are super important for business owners and anyone who interacts with the business, like suppliers or vendors.
So, what’s a business credit score? It’s a number that shows how creditworthy a business is. Lenders, suppliers, customers, and others often check these scores before deciding to do business with a company. There are three main business credit reporting agencies: Dun & Bradstreet, Experian, and Equifax. Business owners can check their own credit reports and scores, as well as those of other businesses.
These three agencies each have their own way of calculating scores. Dun & Bradstreet uses the Paydex score, which ranges from 0 to 100 and is based on payment history. Experian’s Intelliscore Plus also ranges from 0 to 100, but it considers factors like credit utilization, length of credit history, and payment trends. Equifax’s scoring ranges from 101 to 992 and assesses the likelihood of a company becoming delinquent on payments.
Business credit scores are separate from personal credit scores, except for one exception: the FICO SBSS (Small Business Scoring Service). This score uses business credit reports, the owner’s personal credit report, and additional financial data to determine creditworthiness. It’s required by the Small Business Administration (SBA), as well as banks, credit unions, and other lenders. If you’re applying for an SBA 7(a) loan, you’ll need a personal credit score of 600 or better and a FICO SBSS score of at least 140.
Why are business credit scores so important? They can affect your ability to get financing, the interest rates you’re offered, and whether vendors and suppliers will extend credit to you. They can even impact your insurance rates!
Just like with personal credit scores, business credit scores are affected by factors like payment history, credit utilization, and legal issues. To keep your business credit score high, make sure to pay your bills on time, use a mix of credit types without overextending yourself, build good relationships with vendors and suppliers, keep your personal credit score high, and stay out of legal trouble.
To manage and improve your business credit score, regularly check your credit report for accuracy, keep your credit balances low, make consistent and timely payments, use a variety of credit types, and build strong relationships with suppliers.
Business credit scores play a big role in loan applications and interest rates. Businesses with higher scores are more likely to be approved for loans and get better terms. Before applying for a loan, review your credit reports, address any negative items, and be prepared with financial statements and other necessary documents.
So, what’s a good credit score for a business? Business credit scores typically range from 0 to 100, with higher scores indicating better creditworthiness. The FICO SBSS score ranges from 0 to 300. Dun & Bradstreet’s Paydex rating ranges from 0 to 100, with scores of 80 or above indicating prompt payments. Experian’s Intelliscore Plus also ranges from 0 to 100, with scores above 76 considered "low risk."
Checking your business’s credit score is crucial for managing your finances effectively. You can check your score with Dun & Bradstreet, Equifax, and Experian by visiting their websites, registering or logging in, and accessing the credit score information. Most of these bureaus offer a way to check your score for free. If you want to check another business’s credit score, you’ll likely have to pay a fee.
Building a strong business credit score is key to securing your business’s future. Understand the basics of credit scoring, make timely payments, separate your personal and business finances, and be mindful of your credit utilization ratio. Diversify your credit, maintain your personal credit score, regularly review your credit report, and seek professional advice if needed. Good credit habits can open doors to numerous opportunities and foster growth and stability.
