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Checking and Understanding Your Business Credit Score

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Lauren Ward

Lauren Ward

Updated November 6, 2020
Checking and Understanding Your Business Credit Score
In addition to a personal credit score, your business also has a credit report to reflect the health and risk profile of the company. Lenders use the details in your report as a major factor in financingfinancial approvals, as well as the quality of terms offered to your company.  Just as with personal credit scores, having a strong business score can help make it easier to get approved for a small business loan or credit card. High credit scores may also help borrowers qualify for more competitive terms or interest rates, which can make it less expensive to borrow capital. Before you apply for any type of financing for your company, learn about checking your business credit score and why it matters.

Business Credit Scores Explained

A business credit score is a numerical representation of the information on your business credit report. The scoring range is much different than what you see with your personal credit score (for example, FICO® scores range from 300 to 850). There are a few sources for business credit scores including Experian, Dun & Bradstreet, and Equifax. FICO also produces a small business scoring system. Each bureau has its own scoring system and models for determining business credit scores. Here’s a bit more about each scoring system.

Experian

Experian’s business scoring models range from 1 to 100. A higher score is more favorable than a lower one. Experian uses a variety of factors to determine a business’s score, some factors include a company’s outstanding balances, payment history, overall credit utilization, and trends overtime.

Dun & Bradstreet 

The Dun & Bradstreet PAYDEX® score also falls on a scale of 0 to 100, again, with a higher score being more favorable. On this scale, scores of 80 or above are generally considered lowest risk to a lender. A company’s payment history is a major factor that determines its PAYDEX score. 

Equifax

Equifax has a few different scoring models for businesses including the Business Credit Risk ScoreTM, Business Failure Score, and Payment Index. The Business Credit Risk Score indicates how likely it is that a company may incur a 90 day delinquency or charge off over the next year—this score is on a scale of 101-992. Higher scores are generally preferable to lenders. The Business Failure Score ranges from 1,000 to 1,800 and is used to predict how likely a business is to file for bankruptcy in a 12-month period. The Payment Index is an indicator of a business’s past and current payment performance. Each report will also provide a suggested interpretation of the value.

FICO

FICO’s Small Business Scoring Service (SBSS) runs on a scale of 0 to 300, with a higher score being more favorable. This evaluates a number of individual factors and allows banks and lenders to pool the profiles of different businesses, business owners, and other relevant information from various financial institutions.

Factors that Influence a Business’s Credit Scores

While each of the scoring models described above have a proprietary model for how scores are calculated, there are a number of factors that generally impact your business credit score. Payment history can have a major influence, since it can be an indicator to lenders how likely you are to repay future balances. The length of your company’s credit history also plays a role, as does the amount of debt you currently carry. The type of industry you’re in and the size of your company also contribute to your business credit score. When you do a business credit score check, you’ll see quite a bit of information about your company. Items you’ll find include:
  • Ownership details
  • Company financials
  • Risk factors
  • Account history
  • Any liens, judgments, or bankruptcies
  • Uniform Commercial Code filings
Businesses typically have a credit report as long as they’re registered properly. LLCs, and even sole proprietors, may be able to apply for small business financing based on their financial history. 

Why Your Business Credit Report is Important

Your business credit report can play a large role in small business loan applications and other types of financing, which is why it’s important to pay attention and actively manage your score. The SBA notes that “insufficient or delayed financing” is one of the most commonly cited reasons for a failed business. Paying attention to your business credit score can help give you more options if you ever need to secure financing.After all, even if you get approved for financing, a stronger credit score has the potential to help pave the way to more competitive business loan terms. Both credit card interest rates and loan interest rates can jump significantly if your business credit score flags your company as a greater risk. The amount you’re approved to borrow may also vary based on your business’ credit history. Even if you don’t anticipate needing business financing in the near future, your company’s credit score can affect other areas of business as well. Because business credit reports are public information, external third parties are allowed to access them without your permission. Vendors may access your credit profile to determine how quickly they should require payment. If they see that you have a strong history of paying loans and invoices on time, you may be granted a longer period of time. On the flip side, a less consistent payment history may cause you to receive a shorter window of time to pay vendor invoices.A final notable use of your business credit report is to ensure your company has not become a victim of fraudulent activity. Identity theft issues you may discover on your credit report include new business lines of credit or credit cards that your company didn’t actually open. Keep an eye out for any charges or unknown accounts listed on your business credit report to keep your score accurate and avoid the consequences of a low credit score your company may not deserve.

Finding Your Business Credit Score

When looking for your personal credit report, you’ll notice that there are three primary credit bureaus that lenders use to evaluate your score. Similarly, there are multiple companies you can use to access your business credit score as well. Here’s an overview of the main ones available.

Experian

The most basic credit score report costs $39.95 and includes a one-time report summary as well as your score. It also shows any public records associated with the business as well as payment summary trends. Experian also offers more comprehensive options to choose from as well, including a more comprehensive one-time report and two subscription options that offer ongoing benefits.

Equifax

You can get a single business credit report from Equifax for $99.95. The information on the report includes details such as a credit summary of your business, public record, and payment trends. You’ll also see two risk scores: the Equifax Business Credit Risk Score, which ranks your likelihood of becoming delinquent on a loan, and the Equifax Business Failure Score, which assesses the business’s likelihood of failure (or bankruptcy) in the next 12 months.

Dun & Bradstreet

Dun & Bradstreet offers a free business credit report with basic monitoring services for 14 days. Within that time frame, you can view up to four Dun & Bradstreet scores, plus get data on inquiries, legal events, and payment summaries. You’ll also be notified via email anytime there’s a change on your report. After the 14-day window is over, you can upgrade to one of three paid monthly plans that come with a variety of benefits.

FICO SBSS

A business’s FICO® SBSS score is created when a loan application is filed. Since the FICO SBSS score is aggregated from data collected from the other credit bureaus, it can be worth checking in on those credit reports for errors and inaccuracies.  

4 Common Strategies for Improving Your Business Credit Score

While bad credit business loans are available, they typically come with unfavorable terms, like high interest rates, frequent auto draft payments, and/or collateral requirements. Working to build a better business credit score can potentially put you in a better position to qualify for more advantageous loan terms. And while there are a variety of factors that can affect your business credit score, and each bureau has different criteria, here are a few general tips. 

Opening Accounts to Build Your Credit History

One way to start establishing a business credit history, is to pay your business expenses with a commercial account—not a personal account. It can also help to find out which of your vendors report to the agencies. For those that don’t report payments, you can manually add them to increase the trade lines on your account.

Consistently Making Payments

Just as with your personal credit score, paying your bills on time has the largest influence on your business credit score. Late payments are listed on your credit report and the scoring models use that data to determine how likely you are to pay future bills on time. If lenders see multiple late payments and delinquent accounts, they’ll likely be more hesitant to offer you financing.

Checking Your Report for Accuracy

Make sure there aren’t any errors on your business credit report. One common mistake is finding information that actually belongs to another company. Also check to make sure the age of your business is correct, since a longer history can contribute to a better score. Finally, look for any red flags that might indicate identity theft, such as accounts in your business’s name that you never opened.

Lowering Your Credit Utilization

Another part of building your business credit is managing your debt well. Many lenders may view large loan balances as a sign of cash flow issues so it may be wise to try to keep your credit utilization ratio as low as possible. Ways to lower your business’s credit utilization ratio may include paying down balances or asking for higher credit limits from existing creditors—but not drawing on the funds. Just having that extra available credit can lower your credit utilization and may show that your business effectively manages cash flow and debt. Note that some bureaus’ formulas do not weigh credit utilization very heavily. 

Bottom Line

Understanding your business credit score is a process that provides you with a wealth of information. The more you know about your company’s credit history, the more prepared you’ll likely be to apply for financing when you need it. Plus, you can actively work to build and strengthen your business credit score, knowing what areas are important. Ready to support your business with a small business loan right now? Use Lantern to explore multiple options with a single application.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC20035

Frequently Asked Questions

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About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.