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What Is A Good Credit Score For Businesses?

Burkhard Berger | July 21, 2022

Learn how business credit scores work.

Summary: Interested in getting a good business credit score and maintaining it? Here's SoloSuit's guide on all things related to credit scores for businesses.

Most of us are pretty familiar with the idea of a personal credit score, especially once we've gained a financial standing. But a business credit score is a term relatively unexplored for many of us.

We might interrelate these two scores, but to set the records straight, both have a unique formula that is based on various facts and figures that don't align.

Interested in getting a good business credit score and maintaining it? This article has been fragmented perfectly for you to clear up any confusion on what is a good credit score for businesses and how it works. Alongside that, we will also highlight the importance of a good score for your business, and word of advice on building a strong profile. By the end of this article, you'll know everything there is to know about business credit ratings and how to keep them in good shape.

Let's jump right in.

Understand credit scores for businesses

A business credit score is digits but with power—the power to make your company credible. A good business credit score will unlock the doors of future business lending for growth and contingency plans, low-interest rates for financial resilience, and much more.

These business credit scores are used by the lenders to know your creditworthiness standing as a responsible borrower. It doesn't matter if you're a small business attempting to expand by using a marketing tool to reach out to clients and promote your products, or if you're a large corporation; any business dealing with vendors and suppliers can have a credit score.

How does a credit score work?

When we talk about how business credit scores work, it's important to differentiate between personal credit and business credit, especially if you are a sole proprietor. Unlike a personal credit rating which is roped up to you with your social security number, business credit is based on your EIN (Employer Identification Number). This identity is generated free of cost and becomes the groundwork of your business credit.

There are designated business credit bureaus for calculating your credit score as a business. They gather all your business information which mostly includes your credit line and payment history and calculate the business creditworthiness for the lenders to invest.

The calculation of the credit score in a business credit report is evaluated via a unique formula by each bureau. There are four major reporting business credit bureaus:

  1. D&B (Dun & Bradstreet)
  2. Experian
  3. Equifax
  4. FICO

The business credit score is then used by banks, fintech companies, vendors, investors, and even clients to analyze the trustworthiness of your company for future investments. Unlike personal credit ratings, credit scores for businesses are visible to everyone.

Good Business Credit Score Paradigm

What is the science behind the marvel of business credit scores? We are onto decoding the whole “good business credit scores” mystery for you.

Let's take a look at how business credit report algorithms generally work and what they are based on. The collected data is grouped into five categories along with their percentile values to make things clearer at a glance.


Business Credit Score Makeup

Category

Pecentage of credit score

Payment history

35%

Amounts owed

30%

Length of credit history

15%

New credit

10%

Credit mix

10%



These percentages can affect your business credit report negatively or positively depending on how well you manage it.

Again, this is generally how credit scores are calculated and may differ in certain instances.

What is considered a good business credit score for each bureau?

Generally, a good credit score ranges from an index of 0 to 100 but that depends on the agency that you're using. Every bureau will have a unique algorithm to calculate your business credit score. We'll go through the four most common forms of business credit scores and what constitutes a strong business credit score for each bureau. Here they are:

  1. D&B Paydex Score
  2. Equifax Credit Score For Businesses
  3. FICO Small Business Scoring Service (SBSS) Credit Score
  4. Experian Intelliscore

Now, let's breach down each type of score a little further.

I. D&B Paydex Score

paydex score

Dun & Bradstreet is the top agency that qualifies for calculating a business score. So naturally, their flagship scoring model, Dun & Bradstreet Paydex ranks as the top most on our list.

To start with, you need DUNS numbers which are free of cost and can be achieved by registering on their website. That is going to be your business identification number and the foundation of your record. The vendors and lenders can use this number to get the information and report your payment history.

paydex score

For Dun & Bradstreet Paydex, their scores range from 0 to 100. An 80 and above qualifies as an excellent score and anything below 50 means you are in the red zone. Here is a breakdown of how Dun & Bradstreet Paydex scoring works and what lenders consider good business credit scores:


D&B Paydex Credit Score Breakdown

Score Classification

D&B Paydex Score Range

Credit History

Poor

0-49

Extremely late payment (1-3 months)

Moderate

50-79

Moderately late paymnet (15-30 days)

Excellent

80-100

Early or on-time payment



II. Equifax Credit Score For Businesses

equifax page

Equifax works for personal credit scores as well as business credit scores. It checks your status with international clients and suppliers as well. It has two credit scores for businesses.

  • Equifax's business credit risk score ranges from 101 to 992. This score indicates the risk of delinquency in a business that might happen over 3 months. A score of 992 is the highest and 101 is the lowest which indicates that the business is in the danger zone. Your business needs to maintain a score of 570 plus for a credible report from this business credit reporting agency.
    • Equifax's business failure score ranges from 1000 to 1610. Based on the reports over a 12-month period, this score indicates the likelihood of businesses failing or filing for bankruptcies.

equifax report

Equifax is the most difficult of all business credit agencies and their working out is based on DBT (days beyond your term). This may include your payment history, trade data, lawsuits, number of employees, which industry you work for, and more.

Here's a quick run down of their scores and their respective classifications:

Equifax Credit Score Breakdown

Score Classification

Equifax Business Failure Score

Equifax Business Credit Risk Score Range

Credit History

Poor

1000-1134

101-397

Extremely late payment (1-3 months)

Moderate

1135-1468

398-695

Moderately late payment (15-30 days)

Excellent

1469-1610

696-992

Early or on-time payment



III. FICO Small Business Scoring Service (SBSS) Credit Score

fico page

FICO is another model to calculate credit scores and has been in the industry for a long time for personal credit reports. For small business loans, FICO has an SBSS (small business scoring service) credit score.

The formula used to calculate your business credit score will demand your personal credit information as well as your business credit information. So now is the time to make a strategy to pay off your past-due credit card payments. Some other important factors that the FICO SBSS score will take are the liens, years of business, and the number of employees.

The FICO SBSS credit score ranges from 0 to 300. The minimum score you need to prequalify for loan approval is between 140 to 160.

What is a decent FICO SBSS credit score for businesses, you might wonder? Let's take a look below to get more clarity.


FICO SBSS Credit Score Breakdown

Score Classification

FICO SBSS Range

Eligibility

Poor

0-154

Loan approval failed

Moderate

155-165

First screening passed

Excellent

166-300

Loan approval successful



IV. Experian Intelliscore

experian home page

We all are familiar with the name Experian as they are widely used for personal credit score services. They have two scoring models for businesses.

  • Experian Intelliscore Plus is meant for businesses with sole proprietorship and might use some of your personal credit histories.
  • Experian Intelliscore Plus V2 is based on payment history, liens, past delinquencies, trade experiences, credit utilization, and more.

experian report


Both Experian Intelliscore have the same score bandwidth as the D&B Paydex score which ranges from 1 to 100. However, the classification of credit ratings that are regarded as good differs. Let's take a look below:


Experian Intelliscore Credit Score Breakdown

Score Classification

Experian Intelliscore Range

Due Period for Payments

Very Poor

1-10

Extremely late payment (3 months)

Poor

11-25

Late payment (after 60 days)

Moderate

26-50

Moderately late payment (between 30-60 days)

Good

51-75

On-time payment (30 days)

Excellent

76-100

Early payment



Fact: About 85 percent of the Experian credit score depends on your payment history.

Why are good credit scores important for businesses?

Let's just say that you own a software house and someone wants to outsource a software development project to you. But there is one slight problem. Their business credit reports from the bureau aren't up to snuff. Would you want to deal with a company with bad credit scores? The answer sums up why a good credit score is important for a business. A company's credit score has a significant impact on its overall situation.

Having a good business credit score can:

A. Help with business expansion

Every small business owner dreams of expanding their business enterprise one day. Personal equity funding may not have the sustainability that is necessary for a new business to expand. That is why every business needs funding. You can achieve this only if your company has good business credit scores. It shows how promising the future of your company is and attracts more lenders to fund your business.

Having a good business credit score will also help you in saving up your personal finances. When you have ample lenders to give you credit for running your business, there will be no need to use your personal credit for funding your business.

B. Improve overall financial health

Keeping up a good credit score will improve the overall financial health of your business. Businesses become savvy in managing their moneyr to achieve a good credit score and then maintain it over time.

When a company understands its liabilities and the timelines associated with them, it can design a credit cycle to ensure that its payables and receivables are on time.

Whether you're in the business of trading medical supplies like kid masks or selling motor parts on eBay, always remember that this is a continuous cycle; the more you put in, the more you will get. And with added perks! This in return will help a great deal in improving the financial health of the company.

C. Get you better lending terms

Banks want to ascertain whether businesses have a history of borrowing money from lenders and paying it back on time. To approve more loans, banks also ensure that businesses are equipped with enough financial resources for timely repayments.

If you have a good credit score based on these borrowing and payment history, you can secure loans with low-interest rates and better credit terms from the banks. This credible state of the company will pick off more affirmative terms with vendors and suppliers as well.

A good credit score will lower the overall cost of running a company and result in increased profitability in a time when enhancing efficiency, productivity, and profits through hybrid work arrangements are all the rage.

D. Help you with saving up on insurances

Insurance companies are always on the lookout for potential clients, and businesses with a good credit record are their eye candy. If your business shows promising scores, these insurance companies offer feasible insurance rates with whacking perks.

8 Tips for building up your business credit score

A bad credit score is not going to take you places. You cannot let it hold you back in times when businesses are increasingly relying on AI-based solutions to sustain and grow their businesses. So now is the time to pull the strings to make your credit score soar. Here are a few tips to build up a strong business credit score.

1. Pay on time

Good payment history is what you need to build a good business credit score. Unlike a consumer credit score that takes years to build, business credit scores don't take much time to beef up. All the business credit reporting agencies have designated higher categories for businesses that pay up within a month.

2. The more trade lines the merrier

Having a single trade line might be able to boost your credit score up to 40 points. So yes, having trade lines with good payment history will help in building up your credit score. However, having too many trade lines may hamper your credit rating. So watch out for that.

You can also get supply credit from some vendors. Some business credit bureaus require you to have at least three trade lines.

3. A business line of credit with higher limits

Credit lines are as important as trade lines. Get a business line of credit with a higher limit for your transactions. The more transactions you will have, the more your credit score will rise. Even owning a business credit card can help you improve your credit score. It will come with unlimited bonuses that you can spend whatever you like even for relief funding.

4. Avoid crashing your credit limit

Show them you are responsible. Avoid going above your credit limit. Some experts imply using up to 30 percent of your credit limit. The whole gist behind this is to make payments as soon as possible. If you have a business credit card, you should be even more cautious.

5. Get in touch with most business credit agencies

It is best suggested to have at least three major business credit bureaus reports for your business. Since different entities use different bureaus, this practice will build your ties with a vast number of lenders, vendors, and even potential clients, as well as help you build up your business credit score.

6. Bag from lenders that report to these bureaus

Getting loans from lenders that report to the agencies will help you build up your credit score immensely, especially for small business owners. For loan approvals from banks, you need a good business credit score; not an easy option for small businesses. Search for online small business lenders that report to the agencies to build up your repo.

7. Keeping up with your personal credit score

In most cases, your personal credit score is kept completely separate from your business credit reports. But in some cases of small business loan approval, some percentage of your personal credit report is also taken into account. A FICO SBSS is a good example of this. Maintaining good personal credit is also helpful, even if it requires a side hustle to pay off your debt.

8. Monitoring your business credit scores from time to time

Monitoring your business credit report from time to time helps you to become secure as a business. This can avoid a lot of problems like identity theft and some miscalculation which can lead to lowering your deserved business credit score.

Conclusion

Every company should go for a business credit if it wants to flourish because a business is like that growing child that is always hungry.

We can say that business credit is a tool for the business to fund itself. All you need is a credit profile that is built by these credit scores. The factors that make up your business's credit score are all within your control. A bad company credit history can keep the doors of opportunity closed for a long time, just as it becomes difficult to rent an apartment with a bad personal credit score. Paying your debts before the time limit allocated by the lender can make your credit scores soar high.

Keeping a check on your business credit scores for accuracy sporadically with the major credit bureaus helps you maintain your market worth and saves you from issues like misinterpretation or identity theft. And if you're already drowning in debt and facing a lawsuit, you can always turn to professionals for assistance. So get in touch with us and we'll sort things out for you.

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