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Just like individuals, businesses have credit scores — and knowing how to establish, check and understand your business credit score is important to set your company up for future success.
Earning a high business credit score can lead to better terms or rates on business insurance, small-business loans, supplier payments and more. But a low score may limit your choices for those products, as well as other potential opportunities with with banks or vendors.
Here’s what you need to know about business credit scores and business credit reports.
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What is a business credit score?
A business credit score quantifies how risky a company might be to work with. Scores evaluate your business's creditworthiness and ability to handle debts based on factors like payment history, available credit and judgments such as tax liens or bankruptcies.
There are three main business credit reporting agencies: Dun & Bradstreet, Equifax and Experian. Each produces multiple scores to give potential creditors insight into your business’s financial history, health and likelihood of on-time payments.
Dun & Bradstreet scores, for example, include a delinquency predictor score and failure score. One estimates the likelihood of if you'll pay bills on time, and the other predicts whether a business will shut down or file for bankruptcy in the next 12 months.
» MORE: What's the minimum credit score for a business loan?
How are business credit scores calculated?
Business credit bureaus typically collect payment information from sources such as vendors, banks, data-gathering trade associations and business credit card issuers.
Scoring models vary among the reporting agencies, but they each typically look at the following factors:
Payment history to creditors and vendors.
The size and age of your company.
Age of your oldest financial account.
Credit utilization.
Established trade lines.
Risk of failure in your industry.
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Do personal credit scores affect business credit scores?
Your personal credit score is not factored directly into your business credit score. You can have thin or poor personal credit and still have strong business credit. The opposite is also true. However, business and consumer credit scores are linked in other ways.
Most notably, some of the simplest ways to get business credit — such as opening a business credit card — require excellent personal credit. That's because debts like credit cards or business loans typically require a personal guarantee, or a pledge that you'll repay the amount borrowed if your business can't. Lenders will use the business owner's personal credit reports to help evaluate that promise.
There are ways to establish business credit that don't rely on personal credit, like setting up trade lines. Still, the pathway to a good business credit score can be easier to travel with good personal credit. Even if your focus is the former, it can still make sense to take steps to improve the latter.
>> MORE: Does a business loan affect personal credit?
What is a good business credit score?
Perhaps the most common business credit score is the Paydex score, which ranges from 1 to 100. A higher score is better — which is true for most business credit scores — but there are some variations among credit bureaus.
Here's a breakdown of each:
Dun & Bradstreet business credit scores
Dun & Bradstreet issues several scores to evaluate elements of a business. The primary scores used are the Paydex score, failure score and delinquency score.
Paydex score (1 to 100): Scores of 80 or higher are considered low risk, scores of 50 to 79 indicate moderate risk, and lower scores equal high risk of late payment.
Failure score (1,001 to 1,875): A lower score translates to a higher risk for bankruptcy or business closure within 12 months.
Delinquency score (1 to 5): A lower score is better because it equals lower risk for seriously late payment (91-plus days) or bankruptcy.
To get a Paydex score, you need to file for a DUNS number (free through Dun & Bradstreet’s website). Here’s what a Dun & Bradstreet business credit report looks like.
Equifax business credit scores
An Equifax business credit report offers three assessments for businesses: the payment index, the credit risk score and the business failure score.
Payment index (0 to 100): Reflects past payment history. A higher score is better, with 90 or higher indicating bills paid on time.
Credit risk score (101 to 992): Assesses the likelihood of your business becoming severely delinquent on payments. A higher score translates to a lower risk.
Business failure score (1,000 to 1,880): Measures the likelihood of your business closing within a 12-month period. A lower score equals a higher probability of business failure.
For the credit risk score and business failure score, a rating of zero indicates bankruptcy. Here’s what an Equifax business credit report looks like.
Experian business credit scores
Experian’s CreditScore report includes a business credit score and financial stability risk rating along with information like payment trends, account histories and public records.
Business credit score (1 to 100): The higher the score, the lower the risk of serious payment delinquencies.
Financial stability risk rating (1 to 5): A lower score is better because it represents a lower risk for default or bankruptcy in the next 12 months.
Here’s what an Experian business credit report looks like.
Why do I need a business credit score?
There are multiple reasons to build business credit. Here are a few:
Better terms on business loans: A solid business credit score can increase your chances of landing a small-business loan or line of credit at favorable terms.
Lower business insurance rates: As your company grows, business insurance costs can get expensive. A high business credit score may help keep rates lower.
More favorable payment terms with vendors: Trade credit terms — how long you have to pay a vendor or supplier after receiving good or services — can range from 30 to 90 days. Where you fall on that spectrum depends heavily on your business credit score.
How do I get my business credit score?
Here’s how to get your business credit score from each major business credit bureau:
Dun & Bradstreet: D&B offers a free report that gives limited access to four key scores via its website. You can pay ($15 to $30 per month) for unlimited access and additional services.
Experian: You can buy an Experian CreditScore report for $39.95 per report online or subscribe to Experian’s Business Credit Advantage plan ($189 per year) for unlimited access, plus alerts, monitoring and additional analysis.
Equifax: You’ll need to jump through some hoops to get your Equifax business credit score, which is available only to businesses applying for business credit, like a loan or credit card. To get your report, you’ll need to contact an Equifax representative and provide proof of a business credit application. It is free, though.
Business owners should periodically check their business credit to ensure all information is accurate. Although each business credit reporting agency says it carefully vets its information, you still may find mistakes in your business credit history. You can usually correct errors by contacting the bureaus and providing evidence that the information is inaccurate.
