Your business credit score reflects the degree of financial risk a lender takes on when it provides your business with a credit facility, such as a revolving line. It’s also a key factor vendors use to determine if they want to do business with you and what payment terms to offer. It is therefore common practice for lenders and vendors to look at your business credit score to understand its financial health before engaging with your company.
If you have a good credit score, your borrowing and repayment terms will be more favorable and the credit application process will be easier. For example, banks will offer you a lower interest rate or a larger loan amount if you have good credit. Conversely, a poor business credit score will require a higher interest rate, more strict penalties for default, and less favorable payment terms (more on this later).
If someone were to tell you that your business credit score is 65, would you know what that means in practical terms? Small business owners who understand their business credit scores are 40% more likely to get approved for a credit facility. Therefore, it’s important to understand how business credit scoring works and what makes a good credit score.
The definition of a “good” or “poor” business credit score depends on which credit reporting agency is doing the scoring. Business credit scores are assigned by four credit agencies: Experian, Equifax, Dun & Bradstreet, and FICO (Fair Isaac Corporation). These agencies use several factors to determine your business credit score and each has its own scoring system.
Business credit scores start at 1 and usually run up to 100, but in some instances, they go higher. A higher number usually means your business is more creditworthy, but not in all cases. The differences in scoring ranges are one reason you need to understand your business credit score.
The credit rating used can depend on the type of lender. Dun and Bradstreet (D&B) is the most commonly used credit score by traditional lenders. The Small Business Administration uses FICO’s Small Business Scoring Service (SBSS) to assess lending risks. Since different lenders and vendors use different agency scores, it is a good idea to know what your business credit score is with each of these agencies and how it is calculated. Here’s a brief overview of each credit agency.
Dun and Bradstreet is the only business credit agency that allows you to self-report credit-related items. To do so you need to open an account and claim your business page. D&B’s many types of credit scores make it the most comprehensive business credit reporting agency. However, they also make it difficult to monitor your credit scores with this agency. An interesting point to note about D&B’s credit scores is that they are used by the Federal and State governments to vet contract partners.
| Credit and Risk Scores | Score Range | Risk Description |
| D&B Credit Appraisal Composite rating | 1-4 | 1 indicates better overall creditworthiness |
| D&B PAYDEX Score | 0-49 50-79 80-100 | High risk of late payment Moderate risk of late payment Low risk of late payment |
| Supplier Evaluation Risk Rating | 1-9 | 1 indicates the lowest risk of a supplier shutting down within 12 months. |
| D&B Viability Rating | 1-9 | 1 indicates the lowest risk of failure or closure within 12 months. |
| Delinquency Predictor Score | 101-670 | A higher number indicates a lower risk of severe delinquency. |
| D&B Maximum Credit Recommendation | $ amount | Determined by analyzing the size, industry, and payment history of a business |
Experian’s business credit rating is based on public records of debt collections and other legal records, vendor payments, and overall business financial history data. The agency asserts that, “The objective of the Experian Business Credit Score (Intelliscore PlusSM) is to predict seriously derogatory payment behavior.” This is one reason why Experian’s score is the most common one used by banks.
| Credit and Risk Score | Score Range | Risk Description |
| Intelliscore Plus | 76-100 51-75 26 – 50 11-25 1-10 | Low Low to medium Medium Medium to high High |
Equifax maintains three types of business credit risk scores. Equifax uniquely factors in your company’s total available credit when calculating your business credit risk score.
| Credit and Risk Scores | Score Range | Risk Description |
| Business Credit Risk Score | 101-992 | A higher score indicates lower risk. |
| Business Failure Score | 1000-1610 | A lower score indicates a higher risk of business operations ceasing within 12 months. |
| Payment Index | 0-100 | The closer the company scores to 0, the better it pays its suppliers. A score of 100 means all suppliers were being paid past due. |
The FICO SBSS score is based on information from D&B, Equifax, and Experian. It rates a business on a scale of 0 to 300. This score is popular with Small Business Association lenders.
| Credit and Risk Scores | Score Range | Minimum score for SBA lenders |
| SBSS Score | 0-300 | 160 |
