Last updated on August 23rd, 2023
Credit scores are not only for the common everyday consumer. Credit scores also apply to businesses. Business owners provide products and services to customers and typically use credit as capital to run their businesses. So, what is a business credit score? Here’s what you need to know.
Define Business Credit Score
A business credit score, also known as a business rating, is an indicator used by banks to help determine whether they should lend businesses money and at what interest rate. A business credit score, depending on the credit bureaus you are looking at, consists of two to three different factors within their scoring models. The three main business credit bureaus are Dun & Bradstreet, Equifax, and Experian.
Credit Reports for Business
Within the Dun & Bradstreet credit report, you will encounter various scores, however, the three principal scores used are the paydex score, failure score, and delinquency score. The Equifax business credit score report will contain a score for the payment index, a credit risk score, and a business failure score. Finally, the Experian report includes a business credit score and a financial stability risk rating.
All these different factors measure a businesses credit worthiness based on payment history, available credit, judgments, tax liens, and bankruptcy. Fun Fact: D&B scores include a delinquency predictor score (likelihood of late payment) and a failure score (likelihood of business shutdown or bankruptcy in 12 months).
| Dun & Bradstreet Business Credit Scores | Equifax Business Credit Scores | Experian Business Credit Scores |
|---|---|---|
| Paydex score (1 to 100) | Payment index (0 to 100) | Business credit score (1 to 100) |
| Scores of 80 or higher are considered low risk, scores of 50 to 79 indicate moderate risk, and lower scores equal high risk of late payment. | Reflects past payment history. A higher score is better, with 90 or higher indicating bills paid on time. | The higher the score, the lower the risk of serious payment delinquencies. |
| Failure score (1,001 to 1,875) | Credit risk score (101 to 992) | Financial stability risk rating (1 to 5) |
| A lower score translates to a higher risk for bankruptcy or business closure within 12 months. | Assesses the likelihood of your business becoming severely delinquent on payments. A higher score translates to a lower risk. | A lower score is better because it represents a lower risk for default or bankruptcy in the next 12 months. |
| Delinquency score (1 to 5) | Business failure score (1,000 to 1,880) | |
| A lower score is better because it equals lower risk for seriously late payment (91-plus days) or bankruptcy. | Measures the likelihood of your business closing within a 12-month period. A lower score equals a higher probability of business failure. |
Credit Reports
What is in the Business Credit Report? Business credit reports look different for the three credit business bureaus. However, the commonality you will find is that all reports contain a business credit score, in addition to other company information. The reports may include payment trends, as well as account histories and public records. On that note, business credit reports are public information, meaning other companies can pay for the information on a business credit report and vice versa.
Where is business payment information collected? It must come from somewhere. What is it the credit bureaus are looking at in terms of scoring your business? Business credit bureaus collect business payment information from vendors, banks, data-gathering trade associations, and business credit card issuers.
Other factors business credit bureaus will look at include:
- Payment history to creditors and vendors.
- The size and age of your company.
- Age of your oldest financial account.
- Credit utilization.
- Established trade lines.
- Risk of failure in your industry.
To get your credit score you have to acquire it from the individual credit bureaus. The only bureau that offers a free credit score is Equifax and it’s only available to businesses applying for business credit. The other two bureaus require you to pay for their services to gain access to credit reports. Dun & Bradstreet has a monthly subscription service and Experian charges $39.95 per report or unlimited access for a yearly premium.
