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Business Credit Score Metrics and Factor Definitions

Understanding Business Credit Scores: Metrics and Factors Defined

Business credit scores seem like alchemy to most entrepreneurs. The 3-digit number that determines your company’s ability to secure funding can be a total mystery. But it doesn’t have to be! This article breaks down the key metrics and factors that shape your business credit score so you can take control of this critical number.

What Is A Business Credit Score?

Your business credit score is a number between 0-100 or 0-1610, assigned by credit bureaus like Experian, Equifax, and Dun & Bradstreet (D&B). It assesses your business’s creditworthiness and likelihood to pay back loans on time.

Higher scores make it easier to get approved for credit cards, loans, and leases. So monitoring and improving this metric is crucial for any growing business!

The 3 Key Business Credit Bureaus

There are 3 major business credit bureaus that calculate scores:

Experian

Provides a blended score based on your company and personal credit data. Ranges from 0-100.

Equifax

Offers the Business Credit Risk Score (0-100) and Business Failure Score (1000-1610).

Dun & Bradstreet

Uses the PAYDEX Score (0-100) to grade payment habits over time.

While models differ, timely payments and credit history are key for all 3.

What Impacts Your Business Credit Score?

Lots of factors shape your business credit score! Here are 5 key metrics the bureaus look at:

1. Payment History

– Do you pay bills on time, including loans and vendor accounts?
– Late or missed payments hurt scores.

2. Credit Utilization

– What % of available credit do you use each month?
– High utilization can lower your score.

3. Credit History Length

– How long have you had credit accounts open?
– More history = better scores.

4. Recent Credit Applications

– Applying for new credit may lower your score temporarily.
– Too many applications look risky.

5. Business Information

– How long you’ve been operating, revenue size, etc.
– More established firms tend to have better scores.

Monitoring your scores with all 3 bureaus provides the full picture!

What’s Considered An Excellent Business Credit Score?

While models vary slightly, here are general benchmarks for strong scores:

  • Experian: 76+ is low-risk
  • Equifax Risk Score: 80+ is good to excellent
  • D&B PAYDEX: 80+ is considered excellent

Aim for at least 80+ across bureaus to qualify for the best financing rates!

How Can I Check My Business Credit Scores?

You can check scores directly with the bureaus:

Monitoring regularly lets you catch issues early!

You can also use sites like Nav to check all 3 scores at once. Tracking your progress helps optimize the metrics that increase your scores over time.

How Can I Improve My Business Credit Score?

Boosting your business credit score takes diligence, but pays dividends in better loan rates. Here are 5 tips:

1. Check credit reports for errors

Errors can unfairly lower your score. Dispute them with the bureaus asap!

2. Pay all bills early

Payment history has the biggest impact. Automate payments to avoid ever missing one.

3. Use business credit cards responsibly

Charge less than 30% of their limit monthly. Pay in full each month.

4. Limit new applications

Apply for new credit only when absolutely necessary while rebuilding scores.

5. Build tradelines

Open vendor credit accounts and use them responsibly to build your history.

Give it time! Good credit habits take a while to positively impact scores.

The Takeaway

Understanding the key metrics and factors that shape your business credit scores empowers you to monitor this critical number. Check your scores regularly and work to improve payment history, credit usage, history length, new inquiries, and business details. It takes diligence, but the better loan rates and financial credibility are worth it!

What other questions do you have about optimizing your business credit? Let me know in the comments!

 

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