Checking and Understanding Your Business Credit Score

A business can have its own credit report that reflects the risk profile of the company, similar to a personal credit score, which is like a snapshot of your personal credit profile.

Your business credit score plays a crucial role when you want to expand your business, get loans, and qualify for competitive rates and terms. Lenders look to business credit scores to decide about extending loans. Suppliers and other businesses use them to evaluate whether or not they want to work with a business.

Before applying for any type of small business financing, it’s a good idea to learn about your business credit score. Keep reading to find out how to check your business credit score and how to manage it to your best advantage.

What Is a Business Credit Score?

If a lender is considering extending a loan to your company or if a supplier is deciding whether to work with your business, they may want to see your business credit score. This is a rating that’s compiled based on factors such as your company’s age and size, its history managing credit (including whether it has repaid its debts in a timely manner), and any legal issues. This number gives potential lenders and suppliers a quick way to gauge whether you are likely to be a responsible and creditworthy partner if they decide to work with you.

Business Credit Score vs. Personal Credit Score

Especially if you’re just establishing your business, you may be using your personal credit score when you do business, rather than a business credit score. While it may take some time to build up a business credit score, it can be a good idea to do so in order to stop using your personal score for business. Using your personal score might mean that if your business struggles or fails, your score could be affected. And lenders and vendors may prefer to see a business credit score since it more accurately reflects the creditworthiness of your company, not just of you personally.

Recommended: What Is Business Banking?

Where to Check Your Business Credit Score

A business credit score turns the information on your business credit report into a number that represents the “health” of your business. The scoring range is much different than what you see with your personal credit score. For example, the commonly used FICO® scores range from 300 to 850, but business credit scores typically have different scoring systems..

For business credit scores, there are three main sources: Dun & Bradstreet®, Experian®, and Equifax®. FICO also produces a small business scoring system.

Experian

Experian’s business scoring models range from 1 to 100, with a higher score being the goal. Experian uses a variety of factors to determine a business score, such as a company’s outstanding balances, payment history, overall credit utilization, and trends over time.

Dun & Bradstreet

Dun & Bradstreet PAYDEX® uses a scale of 0 to 100, with a higher score being more favorable. On this scale, scores of 80 or above are generally considered to present the lowest risk to a lender.

Equifax

Equifax has a few different scoring models for businesses, including the Business Credit Risk Score™, Business Failure Score, and Payment Index.

The Business Credit Risk Score indicates how likely it is that a company may incur a 90-day delinquency or charge off over the next year. This score is on a scale of 101-992, and higher scores are generally preferable to lenders.

The Business Failure Score ranges from 1,000 to 1,880 and is used to predict how likely a business is to file for bankruptcy in a 12-month period. The Payment Index is an indicator of a company’s past and current payment performance.

Each report will also provide a suggested interpretation of the value.

FICO

FICO’s Small Business Scoring Service (SBSS) uses a scale of 0 to 300, with a higher score being more favorable. This metric evaluates a number of individual factors and allows banks and lenders to pool the profiles of different businesses, business owners, and other relevant information from various financial institutions.

How Business Credit Reporting Agencies Collect Data

Before you run a business credit score check, you may wonder where this information is coming from. Business credit reporting agencies can use a variety of sources to collect data on your business. Among the most common:

•   Public records: UCC filings, tax liens, bankruptcies, and other legal proceeding, for instance

•   Banks and lenders: Many report to agencies about how businesses repay funding such as business loans lines of credit

•   Your vendors and suppliers: Companies you work with and make payments to may report to the agencies.

•   Utilities: Some report to agencies about business payments

•   Collection agencies: Some third-party collection agencies may report accounts they’re working on

Vendor and Supplier Reporting

As noted above, some of the companies you buy supplies or services from may report to one or more of the credit reporting agencies. If so, they’ll tell the agencies whether your payments are on time, late, or even early. If you’re seeking to build your business’s credit history, you may want to ask potential vendors whether they report to an agency, as this can help establish your business’s track record.

Factors That Influence a Business’s Credit Scores

Payment history can have a major influence on your business credit score, since it shows lenders how likely you are to repay future balances. The length of your company’s credit history also plays a role, as does the amount of debt you currently carry. The type of industry you’re in and the size of your company can also contribute to your business credit profile.

If you do a business credit score check, you’ll see quite a bit of information about your company. Items you’ll find include:

•   Ownership details

•   Company financials

•   Risk factors

•   Account history

•   Any liens, judgments, or bankruptcies

•   Uniform Commercial Code (UCC) filings

As long as they’re properly registered, businesses typically have a credit report. LLCs and even sole proprietors may be able to apply for small business loans based on this financial history.

Recommended: Guide to Business Loans for Bad Credit

How to Get Your Credit Score

When you’re looking for your personal credit report, you’ll notice that there are three primary credit bureaus that lenders use to evaluate your score. Similarly, there are multiple companies you can use to access your business credit score, as well. Here’s an overview of the main ones.

Getting Your Score from Experian

The most basic credit score report costs $59.95 and includes a one-time report summary as well as your score. You can obtain either a one-time report and scores, or you can subscribe to ongoing monitoring. For ongoing access to both your reports and scores, it costs $199 a year.

Getting Your Score from Dun & Bradstreet

Dun & Bradstreet offers a free basic credit score monitoring service allowing you to view your scores, alerts, and inquiries. You can upgrade to paid monthly plans that come with a variety of benefits, such as more scores, detailed legal events, and dark web monitoring.

To get going, you will need a D-U-N-S Number, which is a nine-digit identifying number for your business. D&B may have already created one for your company, but if not, you can obtain one for free in up to 30 business days by going to D&B’s site. You may also pay a fee for an expedited number.

Getting Your Score from Equifax

You can generally get a business credit report from Equifax with prices starting at $99.95 for a single report and $399.95 for a pack of five, and up. Depending on your choice, the information on the report might include such details as a credit summary of your business, public record, and payment trends. You may also see risk scores.

Getting Your Score from FICO

A company’s FICO® SBSS score indicates the creditworthiness of a business and is a metric often used by the Small Business Administration (SBA) when reviewing loan applications but is not usually directly available to the business itself. Since the FICO SBSS score is aggregated from data collected from the other credit bureaus, it can be worth checking in on those credit reports for errors and inaccuracies.

Why Your Business Credit Report Is Important

There are many reasons that your business credit score can be significant – and not all of them are obvious. For example, one important use of your business credit report is to ensure your company has not become a victim of some type of fraud. Identity theft issues you may discover on your credit report include new business lines of credit or credit cards that your company didn’t actually open. Keeping an eye out for any charges or unknown accounts listed on your business credit report can help you spot fraud early and keep your score accurate. Here are a few more reasons it’s key to know how to check your business credit score.

Qualifying for Business Loans and Financing

Your business credit report can play a large role when you’re applying for small business loans and other types of funding for a small business, which is a major reason it’s important to pay attention and actively manage your score. Prioritizing your business credit score may help you access more options if you ever need to secure financing.

A strong credit score can influence whether or not your company will be able to get funding. But it also has the potential to help pave the way to more competitive business loan terms. Both credit card interest rates and loan interest rates can jump significantly if your business credit score flags your company as a greater risk. The amount you’re approved to borrow may also vary based on your business’s credit history.

Negotiating Better Terms With Suppliers

Even if you don’t anticipate needing business financing in the near future, your company’s credit score can affect other areas of business, as well. Because business credit reports are public information, external third parties are allowed to access them without your permission. Vendors may access your credit profile to determine how quickly they should require payment. If they see that you have a strong history of paying loans and invoices on time, you may be granted a longer period of time. On the flip side, a less consistent payment history may mean you receive a shorter window of time to pay vendor invoices.

Recommended: What Is Merchant Services?

How Often You Should Check Your Business Credit Score

Now that you know how you check your business credit score, you may wonder how often it makes sense to do so. It’s generally a good idea to check your business credit score regularly as part of your overall bookkeeping strategy. That means at least every few months or every quarter. If you’re paying for monthly or ongoing access, of course, you can review it more frequently. And if you are in the market for a loan or have reason to be concerned about fraud, you may want to check it additionally at those times.

4 Common Strategies for Improving Your Business Credit Score

While bad credit business loans with no collateral and other options are available, they typically come with unfavorable terms, like high interest rates and frequent auto-draft payments. Working to build a higher business credit score can potentially put you in a better position to qualify for more advantageous loan terms. And while there are a variety of factors that can affect your business credit score, and each bureau has different criteria, here are a few general tips.

Opening Accounts to Build Your Credit History

One way to start establishing a business credit history is to pay your business expenses with a commercial account — not a personal account. Taking out a business credit card can potentially help you build your credit score. It can also help to find out which of your vendors report to the agencies. If some don’t report payments, you may be able to manually add them to increase the trade lines on your account.

Consistently Making Payments

Just as with your personal credit score, paying your bills on time has a large influence on your business credit score. Late payments are listed on your business credit report and the scoring models use that data to determine how likely your company is to pay future bills on time. If lenders see multiple late payments and delinquent accounts, they’ll probably be more hesitant to offer you financing.

Checking Your Report for Accuracy

Make sure there aren’t any errors on your business credit report. One common mistake you may see is the inclusion of information that actually belongs to another company. Also check to make sure the age of your business is correct, since a longer history can contribute to a better score. Finally, look for any red flags that might indicate identity theft, such as accounts in your business’s name that you never opened.

Lowering Your Credit Utilization

Another part of building your business credit is managing your debt well. Many lenders may view large loan balances as a sign of cash flow issues, so it may be wise to try to keep your credit utilization ratio as low as possible.

Ways to lower your business’s credit utilization ratio can include paying down balances or asking for higher credit limits from existing creditors — but not drawing on the funds. Just having that extra available credit can lower your credit utilization and may suggest that your business effectively manages cash flow and debt. Note that some bureaus’ formulas do not weigh credit utilization heavily.

Recommended: Business Loan Calculator

Mistakes That Can Hurt Your Business Credit Score

There are a number of mistakes you could make that would negatively affect your business credit score. Here are a few of the most common.

•  Paying debts late or skipping payments altogether

•  Making multiple applications for credit in a small period of time

•  Using too much of your available credit

•  Not making sure that your vendors are reporting to the bureaus so your business can build history

•  Mixing business and personal finances

•  Not checking your credit reports and addressing errors

The Takeaway

Understanding your business credit score is a process that provides you with a wealth of information. The more you know about your company’s credit history, the more prepared you’ll likely be to apply for financing when you need it. Plus, you can actively work to build your business credit score once you know which areas are important.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.

FAQ

How does a business credit rating work?

A business credit rating is a score created for a business, not a person. Ratings are determined from the business’s credit report — including how many employees, the age of the business, payment history, and amount owed — and shared with those interested in checking out the business’s financial soundness. Potential lenders and partners use a credit rating to help decide if your business will be a good risk.

Who tracks business credit scores?

The major bureaus tracking business scores are Dun & Bradstreet, Equifax Business, Experian Business, and FICO.

Can you find your business credit score for free?

The Fair Credit Reporting Act, which gives you the right to free personal credit reports for major credit bureaus once a year, doesn’t give the same access to business credit. It’s difficult to get ongoing access to all your business credit reports for free, but you might get partial business credit information for free or do a one-time pull of a full report.

How long does it take to build a strong business credit score?

For a new business, it can take from three to six months to get a credit score at all. Building a strong business credit score may take between one and two years.

Does checking your business credit score affect it?

Checking your business credit score is typically considered a “soft” inquiry and is not likely to have much, if any, effect on your score.

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Photo credit: iStock/AzmanJaka

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