What Is a Good Business Credit Score?

A business credit score indicates a company’s financial health and ability to manage obligations. This numerical representation offers lenders, suppliers, and partners a quick assessment of risk when extending credit or engaging in transactions. It provides a snapshot of a business’s past payment behavior and financial stability, informing decisions about loans, credit lines, and trade terms.

Defining Business Credit Scores

A business credit score numerically assesses a company’s creditworthiness and ability to meet financial commitments. It helps lenders, suppliers, and partners evaluate risk for extending credit or entering commercial agreements. Scores are derived from a business’s financial history and operational conduct, providing a standardized measure of reliability.

Lenders use business credit scores to determine loan eligibility, interest rates, and credit limits. A strong score leads to more favorable financing terms, including lower interest rates and higher credit lines. Suppliers also use these scores to offer trade credit, allowing businesses to purchase goods or services on account and pay later. Businesses with strong scores often secure better payment terms and larger credit lines from vendors.

Business and personal credit scores differ significantly. Personal scores assess individual consumer debt and rely on a Social Security Number, subject to consumer protection laws. Business credit scores are tied to the business’s Employer Identification Number (EIN) and are largely unregulated by the same consumer protection laws. Data points for business scores include trade payment histories, public records like bankruptcies or liens, and sometimes financial statements. While some lenders may consider both for newer or smaller businesses, a business owner’s personal credit behavior typically does not directly impact their business credit score.

Major Business Credit Reporting Agencies

Several prominent agencies compile and report business credit information, each using proprietary methodologies to calculate scores. These agencies provide insights into a company’s financial reliability, influencing various business decisions.

Dun & Bradstreet (D&B) is a widely recognized provider of business credit information. D&B’s most common model is the PAYDEX score, which assesses a company’s payment performance. This score reflects how promptly a business pays its bills to suppliers and creditors, making it a key indicator for trade credit decisions.

Experian Business Information Services offers various reports and scores. The Experian Intelliscore Plus combines payment history with other financial data to predict the likelihood of a business defaulting on obligations. This score provides a comprehensive view of a company’s financial risk, used by lenders and insurers.

Equifax Business provides insights into a company’s financial stability and payment behavior. Their Equifax Business Delinquency Score predicts the probability of a business becoming severely delinquent on its financial accounts within 12 months. This score is relevant for assessing short-term credit risk.

The FICO Small Business Scoring Service (SBSS) is frequently used by lenders for small business loan applications. The FICO SBSS score integrates both business and personal credit data, providing a holistic view for assessing the credit risk of smaller entities. This model is often employed in automated lending decisions. Each agency maintains distinct data collection practices and algorithms, resulting in different scores for the same business.

Understanding Business Credit Score Ranges

Each major business credit reporting agency uses a distinct numerical range for its scores, with specific thresholds indicating varying levels of creditworthiness. Understanding these ranges and what constitutes a “good” score within each system helps businesses secure favorable terms.

Dun & Bradstreet’s PAYDEX score ranges from 1 to 100, reflecting payment performance. A score of 80 or higher is excellent, indicating consistent on-time or early payments. For instance, 80 means payments are made within terms, while 100 signifies payments made well before the due date. Scores between 50 and 79 are fair, suggesting payments are typically made within 15 to 30 days past due. Scores below 49 indicate significant payment delays and higher risk.

Experian’s Intelliscore Plus operates on a scale of 1 to 100, where a higher score denotes lower risk. A score of 76 to 100 is low risk, signifying a strong credit profile. Businesses in this range are often seen as reliable and more likely to qualify for prime lending rates. Scores from 51 to 75 represent a medium-low risk, while those below 50 indicate medium-high to high risk.

Equifax’s Business Delinquency Score commonly ranges from 101 to 992. A higher score indicates a lower probability of severe delinquency. Scores above 500 are considered good, indicating a low risk of default. For example, a score of 600 or more suggests a business is likely to pay its obligations as agreed, whereas scores below 300 signal a very high risk of future delinquency.

The FICO SBSS score ranges from 0 to 300, often used by lenders for Small Business Administration (SBA) loans. A score of 160 or higher is a strong score, making a business eligible for many conventional and SBA-backed loans. Scores above 180 are particularly favorable, often leading to streamlined application processes. Conversely, scores below 140 may indicate higher risk, potentially leading to stricter lending criteria or credit denial.

Elements that Shape Business Credit Scores

Business credit scores result from calculations based on various data points reflecting a company’s financial behavior and stability. These elements are weighted differently by each scoring model, determining a business’s overall creditworthiness.

Payment history is a primary determinant, reflecting a business’s track record of paying debts and invoices on time. Timeliness of payments to suppliers, vendors, and lenders is tracked, with late payments negatively impacting scores. Consistent on-time or early payments demonstrate reliability and bolster a business’s credit profile.

Credit utilization measures the amount of credit a business uses relative to its total available credit. High utilization rates can signal financial strain or over-reliance on credit, potentially lowering a score. Maintaining a low credit utilization ratio, ideally below 30%, is viewed favorably by credit agencies.

Public records detail bankruptcies, tax liens, judgments, or civil suits against the business. These filings indicate financial distress or legal issues, serving as negative indicators that can severely depress a business credit score. Such events suggest a higher risk of future financial instability.

The age of the business can influence its credit score, as older, more established companies often have a longer payment history and are perceived as less risky. While new businesses can build strong credit, a longer operational history lends more credibility. Industry type and business size, including revenue and employee count, are sometimes considered by scoring models. Some models also factor in reported financial data, such as revenues, assets, and liabilities.