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How Small Business Credit Scores Are Calculated

Mar 09, 2022 • 5 min read
small business credit score is calculated
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      You know that 3-digit credit score that makes or breaks your chances when buying a house or a car? Did you know that your business has a credit score, too? If you didn’t, keep reading for the 411.

      What Is a Business Credit Score?

      Your business credit score is a metric assigned by a credit agency as an assessment of your business’s creditworthiness. It’s a factor considered by financiers, banks, landlords and lenders when deciding if, how much, and at what rate to loan your business money, as well as how likely your business is to repay a loan.

      PersonalBusiness
      Agencies involvedEquifax, Experian, and TransUnionEquifax, Experian, and Dun & Broadstreet
      Where info comes fromPublic and court records, credit card issuers, lenders, and collection agenciesPublic records, lenders, vendors, and personal credit reports of the owners
      Impact of late paymentsPayments more than 30 days late appear on the reportBoth late and early payments are recorded, regardless of how late or early

      Each agency has a proprietary algorithm and uses slightly different methods of measuring business credit scores, and each has products that use different numerical ranges for business credit scores. However, the scale for business credit scores that’s used the most by financiers has scores ranging from 1 to 100, with scores above 75 considered “excellent.”

      The scale used most frequently for business credit scores ranges from 1 to 100, with scores above 75 considered “excellent.”

      Business Credit Scores vs. Personal Credit Scores

      Yes, personal credit scores rate individuals and business credit scores rate businesses—but you should also know a few other key differences between them:

      • Personal credit scores range from 300 to 850, with a score above 700 considered “good” and a score above 800 considered “excellent.”
      • Business credit scores generally fall between 1 and 100, with 75 or higher being excellent.
      • For a 3rd-party to access your personal credit score, they’ll need written or expressed authorization.
      • Business credit scores may be accessed by anyone through the issuing agency.

      How Business Credit Scores Are Calculated

      Dun & Bradstreet, Equifax, and Experian all have slightly different ways of calculating business credit scores, and they don’t publicize the exact details of their algorithms. But the general rubric used by all the credit bureaus factors in:

      • Credit lines a business applied for in the past 9 months
      • Credit lines opened by a business in the past 6 months 
      • Credit repayment history over the past 12 months
      • Late payments on a business’s record

      Other data that credit bureaus use to calculate scores include: a business’s revenue; assets; uniform commercial code (UCC) filings, other public records, and liens; and the overall health of the industry in which the business operates. With all this in mind, you can now determine how to improve your credit score if you’re thinking about pursuing financing.

      How to Access Business Credit Scores

      The first step toward maintaining, fixing, or building a good business credit score: finding out your current business credit score. You can purchase yours from the firm that prepared your last credit score—if this is your first credit score, any of the providers will do.

      The exact cost of the report will depend on how much data you want included. Some bureaus also offer services that provide constant credit monitoring for a monthly subscription fee.  

      How to Improve a Business Credit Score

      There is no silver bullet for improving business credit scores, but 2 fast ways to do so include paying down existing debt quickly and being mindful of the number of your submitted loans, especially if multiple applications are submitted within a 9-month period. The slower, but far more gratifying, way to raise your credit score is to increase revenue and profits, which you can set goals for and track with a strong bookkeeping software platform.

      Time is also a business’s friend, as scores increase the longer a business is open—as long as it hasn’t taken on more funding than it can repay. You can read more about improving a business credit score here.

      Bottom Line: Is a Business Credit Score Essential?

      Not all business financing options use credit scores in their decisions — even submitting Lendio’s application won’t impact your credit. There are also financing options that place a greater emphasis on a business owner’s personal credit score instead. Does that mean you should ignore your small business credit score? No. Since certain types of business loans and financing will review and consider your small business credit score, it’s always a good idea to keep track on how yours is shaping up.

      Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter.
      About the author
      Barry Eitel

      Barry Eitel has written about business and technology for eight years, including working as a staff writer for Intuit's Small Business Center and as the Business Editor for the Piedmont Post, a weekly newspaper covering the city of Piedmont, California.

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