Updated: Nov 30, 2015
Your personal credit score determines your ability to get approved for credit cards, loans and even housing. But you may not realize that your business has its own credit score — actually, a few of them! Several business credit bureaus offer a variety of business scores, but they vary in how they’re calculated and what the numbers indicate about your company.
Business credit scores tell prospective lenders how likely you are to repay a debt on time. Plus, these scores can inform vendors and potential business partners about the health and stability of your operations, which can influence whether they will want to do business with you.
Here’s what you need to know about business credit scores and how they differ at Dun & Bradstreet, Equifax and Experian — the three largest business credit bureaus compiling data about your business. How you manage these scores could influence whether you end up with bad credit business loans, or financing with more favorable terms.
Each of the three business credit bureaus calculates your business credit score a bit differently, but they consider many of the same criteria. Business credit scores typically reflect public and legal records that show bankruptcies, liens or judgments against your operation. The scores also consider your company’s credit history, including payment habits, credit accounts, credit utilization and outstanding balances. Factors such as the size, industry and age of your business may be included as well.
Because Equifax and Experian, unlike Dun & Bradstreet, also offer consumer credit scores, your personal credit scores can influence your business scores — but not the other way around.
Dun & Bradstreet offers proprietary scores and financial reports to businesses. Their basic credit report, intended for lenders making credit decisions, includes a credit recommendation in addition to what they call a Paydex score. This score — which ranges from 1-100, the higher the better — shows how your business prioritizes and pays its invoices. To be assigned a Paydex score, you must first have a D-U-N-S number, which you can establish for free at Dun & Bradstreet’s website.
A more advanced report used to assess business risk also includes the D&B Viability Rating, which measures the health of your business. An even more comprehensive report is available to help verify a business’s financial stability, and it includes what Dun & Bradstreet calls a Financial Stress Score, which shows your likelihood of declaring bankruptcy, and a Commercial Credit Score. Their reports also typically compile your available financial statements, company profiles and industry trends to help a lender or other business learn more about how your company’s finances stack up against others.
Keep in mind that you’ll need to have some existing vendor or credit accounts to be eligible for a score. For example, Dun & Bradstreet requires at least four payments on file before you can get a Paydex score.
The credit bureau Equifax provides two kinds of business credit scores for a business risk score.
One, the business credit risk score, helps creditors evaluate the risk that your business will make late payments. The other, the business failure score, predicts the chance that your business will fail in the next year.
Rather than offering a variety of scores and metrics like the other two major bureaus, Experian makes it simple: each business gets one credit score.
Experian’s business scores range from 0 to 100. The higher the score, the less risky your business will seem to lenders and vendors. Follow these tips from Experian on getting a credit score started in your company’s name!
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