Business Credit Scores 101

Are you a small business? Do you know your business's credit score? The range is zero to 100 for most credit reporting agencies, with at least 75 being desirable if you want to be approved for financing and trade credit (business loan or line of credit), says a report at nav.com and from Gerri Detweiler's new book, Finance Your Own Business.

What determines credit score of a business?

• Size of business
• Payment history
• Outstanding debts
• Credit history length
• Credit utilization ratio
• Industry risk
• Public records (which the credit agencies are always inspecting)

The credit score of your business may be different among the different credit reporting bureaus. The nav.com article summarizes the three most common bureaus below.

Dun & Bradstreet PAYDEX (zero to 100)

• Based on the total number of payment experiences in D & B's file, this is a dollar weighted indicator of the company's payment performance.
• Vendors and suppliers favor the PAYDEX.

Intelliscore Plus^SM from Experian (zero to 100)

• This credit risk score is statistically based and predicts the likelihood of payment delinquency in the subsequent 12 months.
• This score incorporates multiple factors and is quite reliable.

FICO® LiquidCredit® Small Business Scoring Service? (zero to 300)

• The SBSS rates applicants by their odds of making payment deadlines.
• The SBSS score is used for credit line and loan applications (up to 350K from the Small Business Administration).
• 140 is the minimum score to pass the Small Business Administration's pre-screen process.

Using Business Credit Scores

• Lenders want to know how well your company pays debts. They won't want to lend to you if your credit score is low.
• When is the last time that you reviewed your business's financial information? This should be done on a recurring basis.
• Credit scores fluctuate and are not immune to calculation error. Contact the credit agency if you spot an error or it seems that your score is lower than it should be.

Improving the Credit Score

• Companies can raise their score by avoiding late payments, among other actions. Improving the score won't happen ove ight.
• Credit utilization should be about 25 percent.
• Open several credit accounts.