Not all credit scores are created equally. You likely already know that you have a personal credit score; it’s what you need to buy a car, get a mortgage, credit card, or even pass a background check. You probably also already know that there are three bureaus (Experian, Equifax, TransUnion) that report your credit scores. What you may not know, or are still learning about, is that your small business has a business credit score. Just like your ability to pay your credit card bills and mortgage payments on time factors into your credit score, your ability to handle your business’s debt and accounts payable, among other factors, all go into your business credit score.
Just like personal credit scores, business credit scores come from multiple reporting bureaus (Dun & Bradstreet, Experian, Equifax), and can help you get better financing. Also just like personal credit scores, business credit scores are not all created equally. Here’s a breakdown of three credit scores that matter to business owners.
1. Personal Credit Score
As you learn more about business credit and get more into the details of potentially building it or growing your profile, be sure not to neglect your personal credit. In fact, if you’re just starting a business, you may have to lean more on your personal credit profile to get startup financing.
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If you’re years into your business and your business credit score is less-than-stellar, some services may take your personal credit score into account. Taking care of your personal credit score can bail you out if you let your business credit fall apart. By keeping things up on the personal credit side of things, you can have a great plan B for your business and stay on track for your personal goals. Your personal credit score is reported on a scale of 350-850, and you’re entitled to one free credit report a year for you to know what you can work on or fix to have a healthy profile.
2. D&B PAYDEX® Score
The D&B PAYDEX Score is reported by Dun & Bradstreet. With a scale of 1-100, 100 being a perfect payment history, it’s a little simpler than personal credit to gauge where you’re at off the bat. While your social security number is associated with your personal credit and your EIN number with your business credit, you also need a DUNS number to access your D&B PAYDEX Score.
With the special sauce that Dun & Bradstreet uses, paying your bills on time and especially early is key and can work in your favor. If you only pay your bills on their due date, the highest rating you can get is 80, 100-rated payments are those that are made 30 days early. If you want a credit score that takes into account your early payments, the PAYDEX score is one to keep an eye on.
3. FICO® LiquidCredit® Small Business Scoring Service℠
While the PAYDEX score is more concerned with how promptly you make your payments, your FICO® LiquidCredit® Small Business Scoring Service℠ (SBSS score) can help you get some more favorable financing. While having any of your credit ratings high is always excellent, the SBA (Small Business Administration) requires a SBSS score to consider your business for an SBA loan. SBA loans can, depending on the amount, come without much required collateral and with more desirable rates and terms.
PAYDEX scores come on a scale of 1-100, the SBSS score ranges from 0-300. Most lenders set their minimum score at 160, but the SBA reportedly sets their minimum at 140. By working to get your score above the minimum, you can open up your ability to get solid financing and grow your business.
4. Intelliscore PlusSM from Experian
Experian’s Intelliscore attempts to determine the likelihood of serious delinquency by your business for the next twelve months, all based off the business data available. Just like the PAYDEX score, it’s measured on a 1-100 scale, a score of 1 being the highest risk, 100 being the lowest.
The Intelliscore is determined by over commercial and owner variables including tradeline and collection information, recent credit inquiries, public filings, new account activity, key financial ratios and other performance indicators. If you can come to your lender with a solid Intelliscore, you can potentially put their minds at ease and secure more favorable rates and terms than you would otherwise.
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