All You Need To Know About Business Credit Scores

Business credit scores are fundamental in assessing a business’s credit-worthiness. Having a good business credit score helps financial institutions measure the credibility of a business, and extend business loans to them in times of need. Not only do quick finances come handy, but business reputes are also established in the longer run. So, it is always advisable to check your personal and business credit score from time to time to keep a check on your financial position.

How is a Business Credit Score calculated?

A business credit score is calculated based on the company’s credit report. It typically ranges from 0 – 100, and sometimes, also reaches as high as 1800, depending on the type of score.

There are 3 major credit reporting agencies which assess business credit scores. They are Equifax, Experian and Dun & Bradstreet. Each of these agencies has a different approach in computing business credit scores. Most likely, all these agencies extract heavy information from a business’s payment history to suppliers, lenders and creditors.

Let us now understand how each credit bureau calculates a business credit score.

Equifax Business Credit Score

Equifax offers three types of business credit scores, which include Payment Index, Credit Risk Score, and Business Failure Score.

  • Payment Index – The Payment Index is measured on a scale of 100, which reflects the total number of on-time payments made by a company. This type of credit score does not predict the future behavior.
  • Credit Risk Score – Varying from 101-992, this type of score shows how likely a company is expected to become negligent in making payments. It measures the company size, the available credit limits, the tenure of the oldest financial account opened, and invoices of delinquent non-financial transactions.
  • Business Failure Score – Ranging between 1000 and 1800, the Business Failure Score measures the possibility which suggests a business’s final break down. It relies on records which testify the company’s worst payment statuses and credit utilization.

Experian Business Credit Score

Experian’s Business Credit Score pertains to extracting crucial information related to the company’s creditworthiness, such as payment trends, account histories, public records, etc. Some factors which come into account are business time, lines of credit, amounts collected, payment history, available credit, late payments and non-net-30 lines of credit.

Dun & Bradstreet Credit Score

This uses three kinds of risk measurement, which are PAYDEX score, Credit score and Financial Stress score. The Paydex score, ranging between 0 and 100, is based on collated payment data. This data is used to understand a business credit score. Credit Score on the other hand is measured from 1 to 5, with 1 being the best score. This type of score pits a company against the others who’ve had a similar payment history in the past. Lastly, the Financial Stress score matches a business with other companies which share similar business and financial characteristics. It reflects how often a business makes on time vs default payments in comparison to others.

How can you check your Business Credit Score?

It is important to check your credit score before you apply for a business loan. Simply get a copy of your business report from any of the above listed agencies in lieu of a fee, and understand your credit-worthiness.

Key Takeaway

If your business credit score reflects your company’s financial stability, you may opt for an online business loan without any collateral, exclusively with TAB Capital. Get a maximum loan amount of up to Rs.50 Lakh with benefits of minimum paper work, swift online application, attractive interest rates, long repayment tenure and super-fast loan disbursal!

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