Business credit scores: what they are & where to get yours

A business credit score is a numerical representation of a company’s creditworthiness and financial stability. Similar to personal credit scores, these scores are determined by evaluating a company's credit history, payment behavior, and outstanding debts. A strong business credit score can significantly enhance your ability to secure loans, attract investors, and negotiate better terms with suppliers.

This guide will provide you with an understanding of business credit scores, their importance, how they are calculated, and what constitutes a "good" score for your company.

What is a business credit score?

Your business credit score is a value generated by companies like Experian or Dun and Bradstreet and is generated from a huge range of information.

Some of those factors include your trading history, your payment behaviour and whether you have registered with Companies House.

Some of the more common factors include:

• Reports from debt collection services on whether you have or haven’t been paying your suppliers.
• Publicly available information about your company’s trading activities that are gathered from banks or the government.
• Reports from suppliers who have deliberately reported you to a credit scoring company because of your poor payment history.

Much like a personal credit score, your business credit score check is used by banks, suppliers and potential customers or creditors to make a credit check on your to determine if doing business with you is a sound decision and what credit terms they should offer you.

The better your credit score, the more likely you are to be offered credit, or larger amounts of credit, and you might also pay lower interest rates on the amounts you borrowed.

Suppliers can also use your credit score to determine whether they want to do business with you, as it works as an indicator of how reliable you are when it comes to paying back credit or making timely payments on invoices.

How does a business credit score work?

A business credit score operates similarly to a personal credit score, but it is tailored to reflect the specific risks associated with a business entity. When a business engages in credit transactions—whether taking out a loan, leasing equipment, or purchasing supplies on credit—this activity feeds into their credit profile. Here’s how it works:

Data collection

The foundation of your business credit score lies in the data collected from a variety of sources. Credit reporting agencies gather information from lenders, suppliers, public records, and even your business activities. This data contributes to understanding your company’s creditworthiness.

1. Trade credit information: This is one of the most significant components of a business credit score. Suppliers and vendors report how promptly you pay invoices, whether you exceed payment terms, and any payment disputes. Consistent on-time payments can enhance your score, while late payments can harm it.
2. Financial information: Credit agencies analyze your company’s financial health by looking into your business bank account activity, revenue, and existing debts. They use this data to gauge whether your business can handle additional credit.
3. Public records: Information from public filings such as tax liens, bankruptcy filings, or judgments also impacts your credit score. These records indicate financial distress and can significantly decrease your score.
4. Business age and size: Newer businesses often start with a lower score because they lack a robust payment history. Conversely, established companies typically enjoy higher scores due to their proven creditworthiness over time.
5. Credit utilization ratio: Just like personal credit, how much of your available credit you utilize plays a critical role in shaping your score. A lower credit utilization ratio (the percentage of available credit you’re using) can positively impact your score, while high utilization can signal increased risk to lenders.
   
   

How credit reporting agencies evaluate data

Each major credit reporting agency — such as Dun & Bradstreet, Experian, and Equifax — has its own methodology for weighing the collected data. While each agency uses different algorithms, some common elements are typically present:

• Payment history: This is one of the most significant factors. A consistent track record of on-time payments helps to boost your score.
• Outstanding debts: The total amount of debt your company holds in relation to its revenue. High levels of debt can raise red flags for lenders.
• Credit mix: A business that successfully manages different types of credit (loans, lines of credit, trade credit) can be viewed more favorably than one relying solely on a single type.
• Business type: The nature of your business (e.g., sole proprietorship, partnership, corporation) can influence how credit reporting agencies assess risk. Certain industries are seen as higher risk than others, impacting the overall score.
• Industry benchmarks: Each credit agency compares your business's performance to industry norms. If your metrics (like payments and revenue) significantly diverge from industry standards, it may affect your score negatively or positively.
• Owner's personal credit score: Many reporting agencies take into account the credit history of business owners, especially for small businesses. An owner's personal credit score can significantly affect the business's creditworthiness, so it’s vital for entrepreneurs to maintain a healthy personal credit profile.
  
  

Why are business credit scores important?

Understanding the significance of business credit scores is crucial for any entrepreneur or company operating in today's competitive landscape. Here are several compelling reasons why maintaining a good business credit score matters:

1. Access to funding: A strong business credit score enhances your chances of securing funding from banks and other financial institutions. Lenders use these scores to evaluate your creditworthiness, and a higher score often leads to better loan terms, lower interest rates, and larger credit limits.
2. Securing better trade terms: Suppliers and vendors may assess your business credit score before extending credit or favorable payment terms. A solid score can result in more flexible payment arrangements, allowing you to manage cash flow more effectively and reinvest in your business.
3. Influencing insurance premiums: Many insurance companies consider your business credit score when determining your premiums. A good credit score can lead to lower insurance costs, which can significantly impact your overall operating expenses.
4. Building business reputation: A healthy credit score supports the credibility of your business in the marketplace. It serves as evidence of your business's financial reliability and responsibility, fostering trust and confidence among clients and partners.
5. Facilitating growth opportunities: Companies with good credit scores are often viewed more favorably by prospective partners and investors. This opens doors to valuable collaborations, acquisitions, and investment opportunities that can drive growth. A favorable credit score demonstrates a business’s capacity to handle financial responsibilities, making it more attractive to other companies looking to form partnerships.
   
   

The difference between personal credit scores and business credit ratings

Understanding the distinction between personal credit scores and business credit ratings is essential for entrepreneurs looking to manage their finances effectively. Here’s a breakdown of the critical differences between the two:

• Personal credit scores: These scores reflect an individual's creditworthiness based on their financial behavior, such as credit card usage, loan repayment history, and overall debt management. They primarily assess an individual's ability to repay personal debts.
• Business credit ratings: Conversely, business credit scores evaluate a company’s financial health and creditworthiness. These scores are based on the business's credit usage, payment history, and public records, reflecting the organization’s ability to manage credit and pay its obligations.

• Personal credit scores typically range from 300 to 850, calculated by bureaus like Experian, TransUnion, and Equifax, with higher scores indicating lower risk.
• Business credit scoring, however, can vary in their scoring models depending on the credit bureau. For example, Dun & Bradstreet uses a PAYDEX score ranging from 1 to 100, with 80 being considered a good score, while Experian’s business score

• Personal credit scores: A person's credit score significantly affects their ability to secure personal loans, mortgages, and credit cards. A higher personal credit score can lead to lower interest rates and better terms, making it easier to obtain financing for personal use.
• Business credit ratings: In the case of business credit, a good score can influence many aspects of a company's operations, from securing a business loan to determining the terms of vendor contracts. A strong business credit score can result in higher credit limits and lower interest rates, essential for managing operational costs and funding expansion.

• Personal credit scores: These scores consider an individual's financial behavior and history, including credit inquiries and utilization rates. They are tied directly to the person rather than any business entity.
• Company credit history: In contrast, business scores evaluate the company as a separate legal entity. This means that the business's creditworthiness is assessed independently of the personal credit of its owners or major stakeholders. However, in certain cases, particularly with small businesses, personal guarantees may still affect the overall credit assessment.
  
  

How are business credit scores calculated?

Business credit scores are calculated using several key factors that reflect a company's creditworthiness. Here are the primary components that influence these scores:

1. Payment history: This is a critical factor that assesses how consistently a business pays its bills on time. A strong record of timely payments to suppliers, vendors, and lenders can significantly boost a business credit score.
2. Outstanding balances: The total amount of debt a business owes impacts its credit score. High outstanding balances can indicate financial strain and lower the score, while lower balances relative to credit limits are viewed more favorably.
3. Credit utilization ratio: This ratio measures the amount of credit a business is using compared to its total available credit. A lower credit utilization ratio suggests that a business is managing its credit responsibly and can help improve its score.
4. Trade experiences: The history of trade credit transactions, including the number of trade lines (relationships with suppliers and vendors) and the length of these relationships, plays a significant role. A positive trade history enhances a business's credit score.
5. Years in business: The length of time a business has been operational can influence its credit score. Generally, longer-established businesses may be viewed as more stable and trustworthy.
6. Company size and industry risk: The size of the business (e.g., revenue and number of employees) and the inherent risk associated with its industry are also factored into the score calculation. Certain industries may be perceived as higher risk, which can affect the score.
7. Public records and legal filings: Information from public records, such as bankruptcies, liens, and judgments, can negatively impact a business's credit score. Lenders consider these records when assessing the overall creditworthiness of a business.
   
   

How to check your business credit score

How to look up business credit score? To check your business credit score, follow these steps:

1. Identify the business credit reporting agencies

Several agencies track credit reports for business. The three major ones are:

• Dun & Bradstreet: Issues the Paydex score.
• Experian: Provides a business credit score based on various factors.
• Equifax: Offers a business credit risk score.

2. Gather necessary information

Before accessing your credit score for companies, make sure you have the following information ready:

• Your business’s legal name
• Business address
• Employer Identification Number (EIN) or DUNS number, if applicable

3. Access the reporting agencies' websites

Visit the websites of the chosen credit reporting agencies. Here are the links:

• Dun & Bradstreet: Dun & Bradstreet
• Experian: Experian Business
• Equifax: Equifax Business

4. Create an account (if necessary)

Some agencies may require you to create an account or sign in to access your business credit rating check and score. Follow their registration process, which may involve providing your business details and verifying your identity.

5. Request your business credit report

Once logged in, look for options related to business credit reports or scores. Some agencies offer a free trial or allow you to check your score for free, while others may charge a fee.

What counts as a good business credit score?

What's a good business credit score? Let's take a look.

A company credit report is worked out on the Delphi range, which runs from 1 to 100. A score of zero counts as a failed company and anything in the 90-100 range counts as very low risk.

Ideally, you want your business credit score scale to be as high as possible, as anything below 50 on the Delphi score counts as an above average risk and only gets worse as the score goes down.

How to improve business credit score: 5 practical tips

Improving your business credit score is essential for gaining access to loans and establishing good relationships with vendors and suppliers. Here are five practical tips to boost your business credit score:

1. Pay your bills on time: Consistently paying your bills on time is one of the most important factors in improving your company credit scores. Set up reminders or automate payments to ensure you meet deadlines. Late payments can significantly harm your score, so prioritize timely payments, especially on secured assets and accounts with UCC filings.
2. Maintain a healthy credit utilization ratio: Aim to use no more than 25% of your available credit limit across your business credit cards and lines of credit. This shows lenders that you can manage credit responsibly without overextending yourself. If you find yourself nearing this limit, consider applying for additional credit to increase your overall limit rather than maxing out existing cards.
3. Establish trade lines with suppliers: Build relationships with suppliers that report to business credit bureaus. When you purchase goods and services on credit and pay them back promptly, these transactions can positively impact your credit score. This practice helps create a strong payment history, which is a vital component of your credit profile.
4. Monitor your business credit reports: Regularly check your business credit reports from agencies like Dun & Bradstreet, Equifax, and Experian. Look for any inaccuracies or outdated information and dispute them if necessary. Keeping your reports up to date ensures that your score reflects your true creditworthiness.
5. Take on manageable debt: Consider taking on debt even if your business does not currently need funds. This can involve using business credit cards or taking out small loans and repaying them promptly. A track record of responsible borrowing and repayment demonstrates to credit agencies that your business is a low-risk investment.

By implementing these strategies, you can effectively improve your business credit score over time, leading to better financing opportunities and enhanced business relationships.

What is a business credit report?

A business credit check report is a comprehensive document that summarizes a company’s credit history and financial activities, similar to a personal credit report but focused on businesses. It serves as a tool for lenders, suppliers, and potential business partners to assess the creditworthiness and financial stability of the business.

Key takeaways about credit score for business

Here are the key takeaways regarding credit scores for businesses based on the provided background information:

1. Separation of business and personal credit: The credit score of a company is distinct from personal credit scores, allowing business owners to secure financing without relying on their personal credit history. This separation is crucial for managing finances and protecting personal assets.
2. Credit score range: Business credit scores typically range from 0 to 100, with scores above 80 generally considered good. In contrast, the FICO Small Business Scoring Service uses a scale from 0 to 300.
3. Importance of business credit: Establishing a strong business credit history is vital for a business’s financial health. A good business credit score indicates trustworthiness to lenders, suppliers, and other financial entities.
4. Factors influencing business credit scores: Scores are derived from various factors, including the number of employees, historical performance data, payment history, account information, and amounts owed.
5. Credit reporting agencies: Major business credit bureaus include Dun & Bradstreet, Equifax, and Experian, each using different criteria to calculate business credit scores.
   
   

FAQs

Why do you need a business credit score?

A business credit score is essential for establishing financial credibility and gaining access to various financing options. It allows lenders, suppliers, and potential partners to assess the creditworthiness and financial stability of a business.  

Why do you need a business credit score?

A business credit score is a crucial factor in assessing the financial health and creditworthiness of a company. Lenders use this score to evaluate the risk associated with lending money to a business. A good business credit score can lead to favorable loan terms, higher credit limits, and better interest rates.  

Do businesses have credit scores?

Yes, businesses have credit scores, separate from personal credit scores. Business credit scores are used to assess the creditworthiness and financial stability of a company. They are based on factors such as the business's payment history, the amount of debt it has, and the length of time it has been in operation. 

How long does negative data stay on your business credit report?

Negative data typically remains on a business credit report for seven years, although bankruptcies may stay on record for up to ten years. It's important to note that the impact of negative information on your business credit score diminishes over time, as more recent positive payment history is given greater weight in the calculation.

What is an acceptable business credit score?

An acceptable business credit score range is typically considered to be 80 or above on the Delphi range, which runs from 1 to 100. A business credit rating scale in this range indicates that a business is a relatively low risk to lenders and suppliers.  

What does your business credit score start at?

Your business credit score does not start at a specific number. It is calculated based on the information in your business credit report, which includes factors such as your payment history, the amount of debt you have, and the length of time you have been in business. As you build your business credit history, your score will fluctuate based on your financial activities.

What is a corporate credit score?

A corporate credit score is a numerical assessment of a company's creditworthiness, used by lenders and other businesses to evaluate the risk associated with extending credit. It is calculated based on factors such as the company's financial history, payment history, and debt-to-income ratio. 

What is the credit score needed for a business credit card?

The specific credit check for business needed for a business credit card can vary depending on the issuer and the type of card. Generally, a business credit score of 75 or higher is considered good and can increase the chances of approval for a business credit card. 

How to check your business credit score for free?

To check your business credit score for free, you can visit the websites of the three major credit reporting agencies: Dun & Bradstreet, Experian, and Equifax. Some agencies may require you to create an account or sign in to access your business credit report and score. Once logged in, look for options related to business credit reports or scores. Some agencies offer a free trial or allow you to check your score for free, while others may charge a fee.

What is business credit history?

Business credit history refers to the record of a company's borrowing and repayment activities. It is a crucial factor that lenders, suppliers, and other business partners consider when evaluating the creditworthiness and financial stability of a company. Business credit history is established by a company's interactions with creditors, such as banks, credit card companies, and vendors.

Are all business credit scores the same?

No, not all business credit scores are the same. Different credit reporting agencies use different criteria and methodologies to calculate business credit scores. The three major business credit bureaus are Dun & Bradstreet, Equifax, and Experian, and each of them has its own unique scoring model. As a result, a business may have different credit scores from different bureaus. 

Will viewing your credit score impact the scores?

Viewing your credit score does not directly impact your scores. Credit scores are calculated based on the information in your credit report, and simply checking your score does not alter that information. However, frequently requesting your credit score within a short period of time may be seen as credit inquiries, which can temporarily lower your score. 

How long does it take to build credit on EIN?

The time it takes to build credit on an Employer Identification Number (EIN) can vary depending on several factors, such as the business's financial history, payment behavior, and the credit reporting agency being used. Generally, it takes at least 6 months to a year of consistent and responsible credit management to establish a solid credit profile. 

Does an LLC have its own credit score?

Yes, a Limited Liability Company (LLC) can have its own credit score, separate from the personal credit scores of its owners. This credit score is based on the LLC's financial history, such as its payment history, debt-to-income ratio, and length of credit history. Lenders and creditors use this score to assess the creditworthiness of the LLC when considering loan applications and other financial transactions. 

Does every EIN have a credit score?  

Not every EIN has a credit score. A credit score is a numerical representation of a business's creditworthiness, and it is based on factors such as payment history, outstanding debt, and length of credit history. To have a credit score, a business must have established a credit history by borrowing money or obtaining credit from lenders or suppliers.