Both personal and business development in the US is interlinked with having a good credit score. Did you know that, apart from your private credit records, you should also take care of your commercial credit score? Understanding the importance of a good business credit score is a major step to creating a successful company.
What Is a Commercial Credit Score?
Not just your private credit score, but also your commercial credit score is vitally important when building a business. Thus, before you start developing your firm, you should know a bit more about it.
A business credit score, like a consumer credit score, utilizes a firm’s credit history to create a number reflecting a company’s risk. This number, often known as a corporate credit score, forecasts the chances of a company’s on-time payments.
The three largest commercial score issuers are the following:
- Commercial information firm Dun & Bradstreet,
- Credit agencies Equifax and Experian.
For example, Dun & Bradstreet scores contain a delinquency predictor score and a failure score. The first forecasts the chance of a bill being late, while the second predicts if a firm will close or declare bankruptcy in the following 12 months.
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How Credit Companies Calculate Your Business Credit Score?
Once you issue a credit report from one of the aforementioned credit bureaus, you might wonder, how your credit score is calculated. As a matter of fact, these reports are quite similar to your private credit calculations.
Credit bureaus collect a wide array of payment information about you and your business. These factors can include:
- Payment history from vendors and creditors.
- Details about your company (i.e. its size and age).
- How old your oldest financial account is.
- What your current credit utilization rate is.
- How high the risk of bankruptcy is in your niche.
Taking all these indicators into consideration, credit companies create your commercial credit score. Check how high it is before you build your business empire but also take a sneak peek every once in a while just to keep control.
What Is a Good Commercial Credit Score?
The higher the better – that is the typical principle regarding credit score, however, it can sometimes be misleading. Therefore, we should keep an eye on how different credit bureaus describe what a good commercial credit score is.
Dun & Bradstreet
There are three separate scores that Dun & Bradstreet issues:
- Paydex score (1-100): scores of 80 and over are considered low risk; 50-79 moderate risk; 49 and under indicate a high risk of late payments.
- Failure score (1,001-1,875): the lower the score, the higher the chance of going bankrupt in the following 12 months.
- Delinquency score (1-5): having a lover score translates to a lower risk of bankruptcy or late payments (over 91 days).
At Equifax, your business credit report will also indicate three distinct scores:
- Payment index (1-100): a higher score means your past payment history is good with bills paid on time.
- Credit risk score (101-992): a higher score indicates a lower risk of becoming severely late on payments.
- Business failure score (1,000-1,880): a higher score translates to a lower possibility of bankruptcy within the next 12 months.
There are just two main indicators on an Experian commercial credit report:
- Business credit score (1-100): a higher score equals a lower risk of delinquent payments.
- Financial stability risk rating (1-5): a lower score indicates lower chances of failing within a 12-month period.
Get Your Commercial Credit Score Now!
Do not hesitate if you are planning on opening a business – contact credit bureaus to get your commercial credit score. Check these credit reports for any inconsistencies to fix all mistakes unjustly lowering your score.
Good luck in your commercial endeavors!