5 Simple Ways to Understand Your Business Credit Scores

One of the most important things you should know creditors look at to determine your company’s creditworthiness is your business credit score. 

Does your business have a positive credit file established with Equifax Small Business, Corporate Experian, and Dunn and Bradstreet? The reason why this is so significant is because each creditor, lender, or supplier may pull from one, two, or all three of these bureaus when you apply for credit.

So, here are 5 ways to understand your business credit score making it easier for you to grasp how the scoring process works.

1. Credit: The number of trade experiences, balances outstanding, payment habits, credit utilization and trends over time all play a role in what makes up your scores.
2. Account Types: The types of credit your company has reporting such as vendor credit, commercial credit cards, lines of credit, term loans, business leases, and letters of credit clearly show how your business handles various types of financing.
3. Inquiries: The number of business credit inquiries or applications that are generated by your business. Excessive inquiries can have a negative impact on your scores so be selective on where your company applies for credit.
4. Public Records: Recent filings, frequency and dollar amounts associated with liens, judgments or bankruptcies can have a severe impact on your company’s scores.
5. Demographic Information: Years on file, Standard Industrial Classification (SIC), North American Industry Classification (NAICS) code, and business size all play a role in the scoring process. As I mentioned on previous posts some industries are considered high risk so pay close attention to how you classify your business.

Keep in mind that your scores will tend to fluctuate with each bureau depending on what type of activity good or bad is occurring on your company files. Also, keep in mind that each of your files will be different with each bureau because not all creditors report your payment activity to all three of them.

For example, Corporate Experian uses more than 140 variables in its business scoring model and if one of your creditors reports solely to this bureau then this particular account will only appear on your Experian file.

Even though the scoring models used by the bureaus are all different these five factors make up the core of your business credit scores and should serve as a helpful guide for your company.