Business Credit Score Basics

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If you’re a business owner, especially a small business owner, there are likely many concerns that occupy your mind on a day-to-day basis. Business owners wear many hats, so you may be used to handling payroll, figuring out your taxes, managing employees, dealing with customers, fussing with inventory, and a host of other daily activities. However, amidst this whirlwind of activity you may have overlooked the fact that you should probably be paying attention to your business’ credit as well.

Business Credit Reporting Agencies

Just as you have personal credit reports, your business likely has credit reports as well, especially if you’ve ever opened a business line of credit or a business credit card at some point in the past. Credit reports are compiled and generated by companies known as credit reporting agencies. Some credit reporting agencies will focus on individuals, on businesses, or on both.

Equifax, Trans Union, and Experian comprise the three major personal credit reporting agencies in the United States. Similarly, there are three major business credit reporting agencies – Dun & Bradstreet, Equifax, and Experian.

Since different lenders will not always access the same business credit report whenever you apply for new business financing, it is a good idea to periodically check all three of your business’ credit reports to ensure that they contain accurate information. Reviewing just one of your business’ credit reports is not going to be enough, just like it isn’t enough to check only one of your three personal credit reports.

Business Credit Reports

Thanks to the Fair Credit Reporting Act (FCRA), you have the right to claim a free copy of all three of your personal credit reports once every 12 months at no cost. These reports can be easily claimed online at AnnualCreditReport.com. Unfortunately for business owners, there is currently no law that requires any credit reporting agency to provide you with a free copy of your business credit report. Instead, if you want to take a peek at your business credit reports, you’ll be required to pay one of the following fees:

  • Dun & Bradstreet: Approx. $60 to $190
  • Equifax: Approx. $100 to $400
  • Experian: Approx. $40 to $50

Another significant difference between personal credit reports and business credit reports is the privacy of those reports. Your personal credit reports are federally protected and are only available to companies who are deemed to have “permissible purpose” to access those reports under the Fair Credit Reporting Act. Conversely, your business credit reports can legally be accessed by anyone who is willing to pay for a copy.

Business Credit Scores

Whenever you’re applying for personal financing, most lenders choose to rely upon some version of your FICO or VantageScore credit scores to help them assess the risk of doing business with you. When it comes to an application for business financing, lenders may choose from several different options to determine your business’ creditworthiness. Some of the most popularly used business credit scores are as follows:

  • Dun & Bradstreet’s PAYDEX Score (Range: 0 to 100)
  • Dun & Bradstreet’s Commercial Credit Score (Range: 1 to 670)
  • Dun & Bradstreet’s Financial Stress Score (Range: 1001 to 1875)
  • Equifax’s Payment Index Score (Range: 0 to 99)
  • Equifax’s Commercial Delinquency Score (Range: 101 to 662)
  • Equifax’s Business Failure Risk Score (Range: 1001 to 1722)
  • Experian’s Financial Stability Risk Score (Range: 1 to 100)
  • Experian’s Intelliscore Plus (Range: 0 to 95)

Earning Better Credit for Your Business

Many of the actions that will earn you great personal credit scores can be beneficial to your business credit scores as well. While all of the scores above may measure the aspects of your business credit differently, keeping your business credit card balances low and making sure that all of your business’ payments are made on time can certainly improve your scores.

Of course, there are other factors considered in some of your business credit scores, such as the number of years you’ve been in business, the presence of any collection accounts on your business credit reports, how many lines of credit your business is currently utilizing, and the size of your company – just to name a few.

Your Personal Credit Still Matters

While working to earn better credit for your business can certainly pay off in the long run, it would be a mistake to believe your personal credit is not going to matter during any of your future business credit applications. It’s very common for a lender to consider both your business’ credit and your personal credit whenever you apply for new financing. Additionally, even if your business is approved, you may be required to sign a personal guarantee acknowledging that you will accept liability for an account in the event the business fails to pay the lender as agreed.

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