What Is A Business Credit Score?

When you think of credit scores, you usually think of personal credit scores. Even for businesses, personal credit scores are often required for credit cards or loans. However, if you are a business owner, you’re also going to need to know your business credit score.

Business credit scores are a must for credit cards and loans with more liability protection, as well as for many business bank accounts.

So, what exactly is a business credit score? How are business credit scores calculated? And when do these scores matter?

We’ll cover everything you need to know about business credit scores and how they different from personal credit scores.

What Is A Business Credit Score?

A business credit score is a numeric representation of your business’s ability to buy something on credit reliably. Business credit scores use your business’s accounts and payment history to create your business score and indicate your business’s overall creditworthiness.

Your business credit score is a reflection of the riskiness of your business. Lenders, insurance companies, and even vendors may take your business credit score into account when determining whether to approve a loan, underwrite an insurance policy, or provide you with a credit account.

Business credit scores range from 0-100. A higher credit score means that you’re a more creditworthy borrower who makes payments on time, making your business less risky. On the other hand, a low business credit score may indicate that you’ve had trouble paying off your debts in the past or have little to no credit history, making you a risky borrower.

Business Credit VS Personal Credit

Business and personal credit scores are similar in that they represent creditworthiness. However, there are a few distinct differences between the two.

The primary difference is that your business credit score measures the creditworthiness of your business, while your personal score measures your individual creditworthiness based on your personal accounts. For example, a business credit card in the name of your business affects your business credit score. In contrast, a personal credit card in your own name, even if it is used for business, is reported on a personal credit report.

Another difference is how these credit scores are calculated — your business credit score considers some factors that don’t apply to your personal credit score. These include your time in business, your industry, and the number of people your business employs.

Another key difference is that your permission is required before a business or individual can pull your credit score, but the opposite is true of business credit scores. Business credit scores are considered public information, so your permission is not required. This means that potential lenders and investors can see your business credit score at any time. All the more, why is it important to have a good business credit score?

Factors That Affect Your Business Credit Score

If you’re well-versed in personal credit scores, the list of factors that affect your business credit score may look familiar. However, there are some considerations that are specific to businesses like your overall business size and if you operate a business that is considered “high risk.”

Here is a list of the most common factors that affect a business credit score:

• Length of time in business
• The age of your business accounts
• Recent credit inquiries
• Payment history
• Business debt (credit cards, loans, etc.)
• Credit utilization
• Business trade lines
• Business size
• Industry-specific risks

Not sure if your industry is high-risk? Read our article on how to tell if you are a high-risk business to learn more.

If you are a high-risk business, this doesn’t mean you can’t have a good business credit score. It just means that your business is innately seen as riskier and less creditworthy, so you need to really make sure that you do well with the rest of the credit score factors that are in your control, like making on-time payments and having a good credit utilization ratio.

How Are Business Credit Scores Calculated?

If you’re familiar with credit scores, you’ll know that even personal credit scores have different calculations. FICO scores VS VantageScores are calculated differently but end up being very close in number at the end of the day.

Compared to personal credit scores, business credit score calculations vary much more from credit bureau to credit bureau. There also is no formal consensus between the bureaus on what counts as a good business credit score. This can make understanding how business credit scores are calculated more difficult.

The good news?

Even though the calculations can be complicated and the score breakdowns can get wild, business scores still take similar factors into consideration. So, if you want to improve your business credit score, steps like making payments on time and having a good credit utilization ratio will help your score across all business credit bureaus.

So, if you want to know more about how business scores are calculated, we’ve provided a basic breakdown of each major business credit bureau below.

How Dun & Bradstreet Business Scores Are Calculated

One of the main business credit bureaus, Dun & Bradstreet, calls their business credit score the PAYDEX score. The Dun & Bradstreet PAYDEX score ranges from 0-100 with:

• Good Credit: 80+
• Moderate Risk: 50-79
• High Risk: 0-49

For Dun & Bradstreet, the biggest factors that go into this score are paying bills on-time (or ahead of time) and having suppliers and lenders report your payments to D&B.

In addition to the PAYDEX score, Dun & Bradstreet has a Delinquency Predictor Score and a Failure Score. Both have a scale of 1-5 with 1 suggesting a low chance of delinquency or financial stress and 5 being a high chance of delinquency or bankruptcy.

On your D&B report, you’ll also see a Supplier Evaluation Risk Rating that ranges from 1-9 (again with 1 being low risk and 9 being high risk).

So what do all of these additional scores mean for your business? The D&B PAYDEX score is still going to be the most important score as it’s the main business credit score. However, the additional “scores” you see on the D&B credit report can offer helpful insights into areas of your business that could be affecting your overall business score.

How Equifax Business Scores Are Calculated

The main business credit score that Equifax provides is called the Payment Index (PI) and ranges from 0-100. Instead of giving a high/medium/low risk rating, Equifax takes a slightly different approach and bases its credit score criteria on the number of days it takes a business to make payments:

• Paid As Agree: 90+
• 1-30 Days Past Due: 80-90
• 31-60 Days Past Due: 60-79
• 61-90 Days Past Due: 40-59
• 91-120 Days Past Due: 20-39
• 120+ Days Past Due: 1-19

The good news for business owners is that this system is incredibly straightforward, so you can very clearly understand how to raise your score.

Like Dun & Bradstreet, Equifax has a Commercial Delinquency Score and a Business Failure Risk Score. The CDS score ranges from 101-662 and the BFRS score ranges from 1001 to 1722. The lower your score in these ranges, the better and the less high-risk your business appears.

How Experian Business Credit Scores Are Calculated

Experian’s business credit score model is much more similar to Dun & Bradstreet’s in that they have a main business score ranging from 1-100 but breaks down the ratings into five ranges instead of three:

• Low Risk: 76-100
• Low – Medium Risk: 51-75
• Medium Risk: 26-50
• Medium – High Risk: 11-25
• High Risk: 1-10

Like D&B, Experian also has a Financial Stability Risk Rating that appears on the Experian business credit report. The Financial Stability Risk Rating uses the same scoring as the D&B Failure Score with a range of 1-5 (with one being low-risk and five being high-risk of failure or bankruptcy).

For Experian, the biggest factors that affect your overall business score are your monthly and quarterly payment trends, industry risk, and your credit utilization ratio, but factors like bankruptcies, liens, collections, and filed judgments also are taken into consideration.

A Note On FICO Business Credit Scores

While Dun & Bradstreet, Experian, and Equifax are the main business credit bureaus, FICO does have a business credit score as well called the FICO SBSS.

The FICO SBSS score only comes into play if you are trying to get an SBA loan. FICO SBSS scores range from 0-300, with 300 being the best. FICO SBSS scores take both personal and business credit scores into consideration as well as your business’s assets, liabilities, revenue, and time in business. Any liens, judgments, or bankruptcies can also affect this score.

Again, this score only comes into play when lenders are trying to decide if they should approve your SBA loan application or not.

What Is Considered A Good Business Credit Score?

Business scores range from 0-100 with a credit score of 80 or higher being considered good. The credit bureau Experian considers 75+ a good score, but to be safe Dun & Bradstreet’s 80+ is a safer bet for ensuring your score is considered good by all of the bureaus.

It’s worth noting that the FICO’s business credit score, or the FICO SBSS, has a different scoring metric with business credit scores ranging from 0-300. This scoring system only matters if your business is trying to secure an SBA loan. The higher your FICO SBSS score the better, but generally, scores between 160-180+ are considered good enough to get an SBA loan.

Why Your Business Credit Score Matters

Business credit scores come into play heavily when applying for business loans, business credit cards, insurance policies, and business bank accounts.

It is worth noting that your personal credit score may also be taken into consideration depending on the lender or vendor, so it’s really important to know exactly which eligibility requirements you need to meet for the specific product or service you are considering. However, there is one important business area where your personal credit score won’t cut it and you’ll have to have a business credit score — and that’s raising equity capital.

Let’s dive deeper into the specific ways having a good business credit score can help your business.

Improved Loan Approval & Rates

Since vendors often consider your business credit score for a loan, having a good score can increase your chances of getting approved for a loan. Having a good score instead of a fair or poor score can also mean better rates, lower interest, and access to higher borrowing amounts.

Improved Credit Card Approval, Credit Limits, & APR

Likewise to loan approval, a good business credit score can improve your chances of credit card approval. Additionally, the best business credit cards have higher rewards rates, lower APRs, and higher credit limits, which all require proof of good credit history.

Required For Insurance Policies

Some insurance policies require you to have a good credit score. If you do have a score of 80+, you can also negotiate with your insurance provider for lower insurance policy rates.

Can Affect Business Banking Eligibility

Some business bank accounts require a business credit score in order to open a business bank account. This isn’t always the case as some of the best business bank accounts take other factors into consideration, like annual revenue and business industry. However, having a designated business bank account that is attached to your business credit score provides liability protection and is a common tip for improving your business credit score.

It can seem like a chicken-versus-the-egg situation, but the bottom line is there’s a reason you need a business bank account.

A Must For Equity Investments

Lenders aren’t the only ones who care about your business credit score; investors do, too. And, if you are a startup or want to expand your business, you’re going to need to have a good business credit score to secure the equity investment you need.

Since business credit scores are considered public information, investors can look at your score and regularly use that information in order to decide whether or not to invest in your business.

Builds A Successful Business Image

Because business credit scores are public information, having a strong credit score makes your business appear more:

• Established
• Reliable
• Trustworthy
• Professional

Anything you can do to boost your business’s professional image and reputation is important for running a successful business and can come into play for all of the situations we mentioned above, as well as many other unforeseen situations — you never know what impact having a strong, professional brand can have.

How To Check Your Business Credit Scores

While there are free personal credit score websites for obtaining your personal credit score and report, unfortunately, credit bureaus are not legally obligated to provide you with a free business credit score or report. However, there are plenty of affordable services available when you want to see where your business credit stands. Some services allow you to sign up at no cost and may provide some features; for others, you will be required to pay a one-time fee, monthly subscription fee, or annual fee to take full advantage of these services.

We’ll cover how to check your business credit score with the three major business credit bureaus: Dun & Bradstreet, Equifax, and Experian.

Before you get started, make sure that you have your Employer Identification Number (EIN). This number can be obtained for free through the IRS and is used for tax purposes. If you already have an EIN, it’s likely that you already have business credit profiles available through Equifax and Experian. If you don’t have an EIN yet, read our full post on how to build your business credit score first to make sure you have enough information and accounts attached to your EIN to have a business credit score.

Here’s what the three main credit bureaus charge to access credit scores:

• Dun & Bradstreet: To get access to your PAYDEX score (the credit score Dun & Bradstreet assigns businesses), you can expect to pay $139.99 for a one-time report or $49/month+ for a monthly D&B Credit Insights service. Premium and credit-building specific plans are available at a higher cost. You can also buy reports at a discount when you buy five or more.
• Equifax: Single business credit reports can be purchased from Equifax for $99.95. You can also buy five reports for $399.95. Equifax’s reports generate three numbers: one based on your business’s payment history, one that predicts how likely you are to skip payments to creditors, and another that predicts how likely your business is to fail.
• Experian: Credit score results through Experian can be purchased for as low as $39.95. A more detailed report can also be purchased for $10 more. Experian additionally offers an annual plan of $189 per year that enables daily credit monitoring, unlimited report access, and credit inquiry alerts. More expensive plans are available for lenders, vendors, and investors who want access to multiple business credit scores a year.

How To Improve Your Business Credit Score

Maintaining a high business credit score is necessary to receive the best interest rates and the lowest insurance premiums and to open up more funding opportunities for your business. To improve your business credit score, the first step is to make sure that you’ve established credit with the big three (Experian, Equifax, and Dun & Bradstreet). You also need to apply for your EIN and D-U-N-S number if you haven’t already.

Don’t stop there, though. To get your company on the radar of the credit bureaus, you must have open accounts specifically for your business. This could include a business phone line, business credit cards, a trade line with a vendor, or a business bank account.

Learn more about ways to raise your score in our post on how to build your business credit score.

One final thing to note is that while having a high business credit score is important, it’s not the only factor that lenders and others will use to assess your creditworthiness. Debt-to-income ratio, annual revenue, and personal credit score may also be used in addition to your business credit score and report. Learn some of our favorite cash flow tips to help increase your revenue and decrease your expenses and debt.