How Business Credit Ratings Are Determined

Getting business financing is a challenge in the best of times. In difficult economic times, with credit markets so tight, it can often seem as if getting business financing is borderline impossible.

How can you improve your chance of getting financing for your business? Maintain a strong business credit rating. A strong rating will make it easier to get approval when applying for any type of business financing, whether it’s a term loan, commercial mortgage, line of credit, business credit card, or trade terms from one of your vendors.

If you want to improve your business credit rating, it helps to know exactly how the rating is determined. Banks and other lenders use data from one or more credit reporting agencies when analyzing the creditworthiness of any potential business borrower. Here are the primary agencies.

Dun & Bradstreet is probably the most widely recognized and commonly used reporting agency. It compiles business and corporate credit ratings and possesses a vast database of credit profiles on millions of United States companies.

D&B has created a proprietary Paydex numerical scoring system, which uses a multitiered approach to rating business credit. The Paydex system combines both payment history and current payment capability to assign a numerical credit score between 20 and 100 to each business it rates. The higher the score, the safer the credit risk.

A Paydex score of 80 indicates that a business pays its bills on time. A score of 80 is usually the minimum required to qualify for business credit. A score of 70 or below indicates that a business has made late payments, anywhere from 15 days all the way to 120 days and beyond.

In addition to the Paydex score, D&B assigns companies a U.S. Commercial Credit Score, ranging from 101 to 670, that predicts the likelihood of a firm paying in a “delinquent manner” (defined as 90 or more days past terms) in the next 12 months. Here’s how these scores translate:

Score Score class Incidence of delinquency
536-670 1 2.5%
493-535 2 4.8%
423-492 3 12.9%
376-422 4 24.2%
101-375 5 58.8%

Equifax assigns businesses a Credit Information Score, which is based on payment data such as how long a company has been in the Equifax database, the company’s current payment index, the number of payment references or inquiries on the company in the past 90 days, and the number of and most recent derogatory items. These scores range as follows:

0-9 Lowest risk
10-20 Average risk
21-30 Above average risk
31-40 High risk
41-69 Highest risk

Experian issues Corporate Credit Profile ratings to help creditors determine the creditworthiness of potential borrowers. It uses two different rating systems:

  1. Intelliscore is designed to predict payment delinquencies in excess of 90 days. Intelliscore assigns a risk score ranging from 0 to 100 — the higher the score, the lower the credit risk.
  2. The Vantage Score aligns a company’s various credit scores from different rating agencies to create a single score ranging from 501 to 990 that corresponds to a credit grade as follows:

    901-990 A
    801-900 B
    701-800 C
    601-700 D
    501-600 F (formerly Business Credit USA) provides a simple yet informative business credit report that contains information such as the names of company officers and managers, their contact information, references, and UCC filings, as well as a simple number and grade rating chart as follows:

95 and above A+
90-94 A
85-89 B+
80-84 B
75-79 C+
70-74 C
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