Just like how individuals have a personal credit score, businesses have a commercial credit score.
Simply put, a better credit score will secure better loan terms and fees, and more lenders.
How Individual and Business Credit Scores Differ
For an individual with a social security number, as soon as they begin working or apply for a credit card, their credit profile is made.
Over time, their credit grows and changes.
Scores range from 300 to 850, where anything above 680 is considered a good rating.
For businesses, a credit score is an indication of its ability to repay debt on time.
It shows the health and stability of the business.
Companies who pay bills on time, are legally stable, and don’t have excessive debt will score well.
Vendors, suppliers, and lenders use this information to decide if they would like to finance or work with the company.
Some lenders are more interested in past delinquencies rather than the score itself.
However, businesses should use the information to determine where to improve their company.
In some cases, paying bills before they are due can boost the score by up to 20 points.
The information submitted to the credit bureaus is voluntary; the business is responsible for correcting any mistakes on the information on the report.
Factors That Will Affect a Commercial Credit Score
Credit bureaus offer several types of credit reports, each studying a different combination of factors.
In some cases, particularly for smaller businesses, the personal credit situation of the owner can affect the business credit score.
However, business credit reports are not studied when looking at a personal credit report.
The score range generally changes for each bureau.
However, even for bureaus with the same range, the meaning of the score can vary.
The bureaus look at a different combination of factors for their reports.
They also set independent prices for each report.
The credit scores and reports are available to the public, granted that the fee is paid to access the report.
Dun & Bradstreet
To get a score from Duns & Bradstreet, the business must have a D-U-N-S number.
This is available for free on the bureau’s website.
The bureau requires the business to have a credit account and a minimum of four payments in order to get a credit score.
Reports begin at $61.99.
The company offers several credit score reports.
The basic one, called PAYDEX, scores a business on a scale from 1 to 100.
The score is a representation of the priorities of the business and how soon it pays its invoices.
In this report is a recommendation to the lender.
For this bureau, 80 is considered a good score.
The advanced report is used to assess the risks and health of the business.
The comprehensive report issues a Financial Stress Score that represents how financially stable the business is.
This report is also used to compare companies because it gives information about the company profiles and industry trends.
The Business Credit Risk Score evaluates the possibility of the business making a late payment.
The company size, credit card limit, and age are assessed and placed on a scale from 101 to 992.
The Business Failure Score predicts the possibility of the business failing within the next year.
On a range from 1000 to 1880, the age, balance from the past three months, and worst payment of the last 24 months are studied. A score of 0 indicated bankruptcy. These reports start at $99.99.
A higher score indicates a safer business.
For this, a score of 70 or above is considered a good score.
The report is considered to be predictable, as it uses statistical modeling of some 800 commercial variables.
Among other things, the report looks at the payment trends, trade experience, outstanding balances, credit use, account histories, and public records of the company.
The age and size of the company are also taken into consideration.
The report is the least expensive of the three, starting at $39.95.
Checking this report will give a company insight into the aspects of their business that are lowering their score.