What Is Your Business Credit Score?

by Mark Henricks

An individual's credit score can affect the ability to get a loan, rent a place to live, obtain insurance and more. Similarly, businesses also have credit scores, and these scores possess similar ability to help or hurt. Having a good credit score can make the difference in obtaining financing, getting good terms on loans and even winning new accounts. Increasingly, business-to-business buyers are scrutinizing a business's credit score when deciding who will get their purchase orders.

Business vs. Personal Credit Scores

A business credit score resembles an individual credit score in some ways, but there are important differences. As with personal scores, there are three major business credit score suppliers. Dun & Bradstreet's Paydex[1] is the most widely used, followed by Experian's Business Credit Ranking Score[2] and Equifax's Suppliers Credit Risk Score[3].

All use different sets of information to arrive at their scores. Dun & Bradstreet's Paydex score looks only at payment history, however. Experian and Equifax examine a variety of other factors, which may include company size, how long they've been in business, and collections activity. Dun & Bradstreet and Equifax also provide additional scores beyond the basic one. These extra scores evaluate traits such as risk of business failure.

What Makes Up a Business Credit Score?

A small business credit score looks only at the business's history, not the personal credit history of the owner. However, lenders may also consider the owner's personal credit score when considering whether or not to extend credit to a small business. And not all businesses have credit scores. Those with business credit cards will likely have Experian and Equifax scores, but companies must apply to Dun & Bradstreet for a DUNS number to get a Paydex score.

The numerical scale used to represent a business credit score also differs from consumer scores. Consumer scores go from 300 to 850. Each business score reporting agency uses a somewhat different method of calculating and scoring, but generally they go from 1 to 100, with 100 as the best score. The extra scores provided by the agencies use larger scales. For instance, the Equifax business failure score scale goes from 1000 to 1880.

Knowing the Score

It's a good idea to monitor your business credit score by requesting a score from each of the three major agencies annually, and before applying for a loan. But unlike consumer credit scores, there's no federal law that requires agencies to provide a free annual score, however. You will have to pay for your score.

If your score is low, such as a Paydex score of 60 indicating a history of late payments, you may be able to improve it. One way is to correct any errors by writing the reporting agency. You may also write the lender or credit grantor—not the reporting agency—and request a goodwill removal of the late payment item. Once mistakes are corrected, you can help your score by paying on time, or before. Dun & Bradstreet awards extra points for businesses that settle their bills early rather than just when due.

A business credit score is a fundamental element of your company's financial image and has a powerful effect on your ability to get credit, to get favorable terms on loans and leases, and even to get customers. Knowing your score, how it was figured, and how to improve it are all vital to managing your business's financial health.

 

Explore Borrowing Options Available from PNC[4]

Whether the flexibility of a Line of Credit will help you best prepare for the changing needs of your business, or you're looking for a Term Loan to provide a specific amount of credit to purchase assets or meet specific financing need, PNC has a variety of borrowing options to meet your needs. 

Learn more about PNC Business Lines of Credit »

Learn more about PNC Business Term Loans »

About This Author

Mark Henricks is a freelance journalist covering business, entrepreneurship, technology, personal finance, health and fitness  for leading publications.


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Important Legal Disclosures and Information

  1. http://www.dnb.com/lc/assess-credit-risk-using-dnb-paydex.html

  2. http://www.experian.com/small-business/business-credit-score.jsp

  3. http://www.equifax.com/business/business-credit-reports-small-business

  4. All loans and lines of credit subject to credit approval and require automatic payment deduction from a PNC Bank business checking account. Origination and annual fees may apply.

PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). This article has been prepared for general information purposes by the author who is solely responsible for its contents. The opinions expressed in these articles are those of the author and do not necessarily reflect the opinions of PNC or any of its affiliates, directors, officers or employees. This article is not intended to provide legal, tax or accounting advice or to suggest that you engage in any specific transaction, including with respect to any securities of PNC, and does not purport to be comprehensive. Under no circumstances should any information contained in the presentation, the webinar or the materials presented be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy or should it be considered legal or tax advice. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc., will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission.  Banking and lending products and services, bank deposit products, and Treasury Management products and services for healthcare providers and payers are provided by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC. Lending and leasing products and services, including card services and merchant services, as well as certain other banking products and services, may require credit approval.