Business Credit Scores and How They Work

The world of finance is a vast, sometimes confusing space. This is especially true for those in the initial stages of their business looking into concepts like business credit to help them grow and scale. 

What is business credit? Which factors matter most in your score? More importantly, how do you get started? 

If you’re interested in learning more about business credit scores, let’s walk through the comprehensive guide below to discover all you need to know to navigate business credit successfully. 

What Is a Business Credit Score?

As the name suggests, a business credit score is a score that tells someone about the financial health of a company as well as whether or not they’re delinquent borrowers or a business that always pays on time or in advance. 

Of course, the name of this credit score is pretty self-explanatory. But what are business credit scores used for? 

Much like a personal credit score, a business credit score is used by lenders, vendors, and similar parties to determine your creditworthiness. A higher score will make it easier for you to secure the funding that you need to scale your business. 

With more knowledge of how these scores function, how to build them, and what to watch out for, it will become much easier to navigate your credit so that you can use it to your advantage. 

What Are the Main Business Credit Scores?

Most are familiar with the three major credit bureaus that are crucial to personal credit: Experian, Equifax, and TransUnion. 

But what are the main business credit bureaus that you should be aware of when monitoring business credit? 

You’re going to actually deal with many of the same bureaus when you’re checking your business credit scores. While Experian and Equifax are known in the personal credit space, they also have a big presence in the business credit space as well. 

Experian Business and Equifax Business don’t align with each other’s scoring systems in the same way that they do when it comes to personal credit. They have their own unique scoring systems that offer different insights into the financial health of businesses. 

Dun & Bradstreet is the leader in the business credit space. Dun & Bradstreet offers DUNS numbers (more on that in a bit), credit monitoring, portfolio management, and more to help small businesses thrive. 

Of course, it’s also important to know which scores to look into for each bureau. 

Here’s a breakdown of the major business credit scores and their functions: 

• The Dun & Bradstreet PAYDEX Score: The Dun & Bradstreet PAYDEX score features a score range of 0 to 100, with scores of 80 to 100 considered good. The PAYDEX score is designed to help vendors and suppliers assess your risk as a borrower, with on-time payments being the factor your entire score is based on. If you’re late (15 to 30 days) or end up severely behind on payments (more than 30 days), it will considerably reduce your score. 
• The Experian Intelliscore℠ Plus Score: Experian’s Intelliscore Plus Score has a proprietary scoring model, influenced by data from public records, your personal credit file, and public filings. Factors that impact this score include payment history, SIC codes, time operating, business size, liens, and so on. This score also ranges from 0 to 100. A good score is considered to be anywhere from 76 to 100. 
• The Equifax Business Failure Score: The Equifax Business Failure Score is a score that deviates from the above scores by providing insight into the likelihood of a business incurring a severe delinquency (90 days) or charge-off over the period of the next 12 months. This score ranges from 101 to 992. 
• The Equifax Business Credit Risk Score: The Equifax Business Credit Risk Score is a score that evaluates the likelihood a business will fail due to a formal or informal bankruptcy within a period of the next 12 months. This score ranges from 1000 to 1610. 
• The Equifax Business Delinquency Financial Score: The Equifax Business Delinquency Financial Score is another score designed to provide both business owners and lenders an idea of how at risk of delinquency a business is. The score ranges from 101 to 650, with scores falling between 585 and 650 considered to be the best (lowest risk). 

What Are the Main Factors That Affect Business Credit Scores?

There are several factors that bureaus are going to take into consideration when they’re calculating your business credit score. While scores may vary, here are the most important factors that will determine where you fall on any scale. 

• Payment History: Your payment history is always going to be at the top of the most important things to focus on when you wish to build credit. If you have a history of making late payments or not at all, your score will plummet. If you have a stellar track record of on-time payments, your score will rise.
• Age of Business: Not all business ideas work out, but those who manage to beat the odds demonstrate that they’re financially responsible and able to navigate challenges. The longer your business operates (with good credit), the better your score will be. 
• Public Records: Do you have public collections or liens on your credit report? If so, this is going to bring your score down. Business credit scores are designed to help lenders assess risk, and these types of issues can bring up major red flags. 
• Lines of Credit: Have you opened up any new accounts recently? Credit inquiries and new lines of credit can both have an impact on your score. However, these types of factors may not be as significant as some of the others listed above, unless you’re applying for a host of credit types one after the other. 
• Credit Usage: The impact credit utilization will have on your score is going to vary depending on the score type. Lower credit utilization is ideal for building your score. 

There are a couple of other things worth noting that will impact whether or not you could get approved. This includes the following advice. 

• Lenders aren’t just looking at your history, but the present as well. What do your finances look like? If you don’t appear to be able to manage the different types of business credit you’re applying for, you may be rejected. 
• Make sure you’re using the right NAICS code. Lenders are going to be assessing industry risk when they take a closer look at your business. If you’re using the wrong code, it can ultimately determine whether or not they approve your application. You shouldn’t lie about the industry you’re in, but you should make sure you’re listing the correct information based on your operations. 

How Do You Check Your Business Credit Score?

All you have to do to check your business credit score is to go to one of the main credit bureaus listed above, navigate their website, and pay the fee. 

Yes, business credit scores often need to be paid for in order to be viewed. However, there are some exceptions. 

Take, for example, checking your score with Dun & Bra