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You are here: Home / Archives for business credit score

How Business Credit Ratings Size Up to Personal Credit Ratings

January 14, 2010 By Marco Carbajo

Business Credit RatingSimilar to your personal credit rating, businesses also have a business credit rating that potential lenders use to determine its credit worthiness. Unlike the FICO® credit score, there is no universal scoring system lenders use for determining the credit worthiness of a business.

While the majority of lenders utilize FICO® for basing the credit worthiness of a consumer when it comes to businesses lenders take many other factors into consideration. This includes but not limited to your business credit score, company size, annual sales, classification, years in business and financials.

Where a personal credit rating is based on financial information provided by credit card companies, retail establishments, financial institutions and public records a business credit rating is determined by information supplied by the business owner and data gathered from lenders, vendors, suppliers, and other trade accounts.

For this reason, potential lenders may be different from one another in their evaluation of your business’ credit history by emphasizing certain qualifications more than others. Like most industries, there is a specialized language involved with business credit ratings.

The following is a sample of the most common terms used as well as their definitions from Dun & Bradstreet (a business credit bureau):

  • Average High Credit / Highest Credit –In order to put a business’s credit in perspective, these are based on the total amount of credit owed as compared to the industry as a whole. 
  • Business in Good Standing –Includes any problems with the business overall.
  • Commercial Credit Score –A score that predicts the chance of an account becoming severely delinquent within one year.
  • Comprehensive Report –This is a report that includes a combination of several D&B business credit reports painting a more complete picture of your company’s credit history. It includes the results of your PAYDEX analysis, the company’s credit score and Financial Stress class, as well as any public filings or liens, the business’s history and operations (including when it filed for incorporation, annual financial statements, facilities, affiliations, and number of employees).
  • Credit Score Class –This is part of the D&B assessment that gauges payment habits to determine how likely it is that a potential account will be delinquent in the next 12 months. The scoring can range from 1 to 5 with 1 being the score assigned for the lowest risk and 5 for the highest.
  • Financial Stress Score –This is part of the D&B assessment that analyzes the Financial Stress that a business is experiencing in order to predict how likely it is that a business will fail in the next 12 months.
  • PAYDEX –This is D&B’s primary assessment that analyzes how likely it is that a company will make its future payments on time.  Having a paydex score of 80 for a business can be compared to having a 720 personal credit score. In order to generate a paydex you will need to have a minimum of four trade experiences reporting on your DNB file.

Here are a few sample business credit reports:

Dun & Bradstreet business information report sample

Dun & Bradstreet enhanced comprehensive report sample

Corporate Experian Business Credit Score Report sample

Small Business Equifax Commercial Credit Report sample

To order your business credit reports:

Dun & Bradstreet (D&B)

Equifax Small Business Enterprise

Experian SmartBusinessReportsTM

 

I also encourage you to familiarize yourself with the top ten business credit bureaus in the industry. It’s important that you understand your business credit rating and what you can do to build a stronger business credit file. This will enable your business to obtain the financing it needs at the best available rates.

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>
 

To Your Success!

Marco Carbajo

About the Author Marco Picture 2009 Super Small pic

 Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Filed Under: Business Credit Tagged With: business credit rating, business credit ratings, business credit report, business credit score, business credit scores

Business Credit Ratings Explained

October 29, 2009 By Marco Carbajo

Dun and Bradstreet

Business Credit Ratings

 

There’s been quite a stir on the integration of FICO® 08 which is the credit scoring system used by the majority of lenders to determine a consumer’s credit worthiness. Similar to your personal credit ratings, businesses and corporations also have business credit ratings that potential lenders use to determine its credit worthiness.

Unlike a personal credit rating, there is no designated standard for determining the credit worthiness of businesses. However, the main tool used to determine and establish company credit ratings is D&B’s PAYDEX system.

Where a personal FICO® score is based only on credit history that includes information on how much a person borrows and how well they repay loans, a credit rating for a business takes into consideration company size as determined by assets and number of employees.

Where personal credit ratings are based on financial information provided by credit card companies, retail establishments, and financial institutions, a business credit report and rating is determined by information supplied by the business owner and gathered from vendors, suppliers, and other trade accounts.

For this reason, potential lenders may be different from one another in their evaluation of a business’ credit history by emphasizing certain qualifications more than others.

Like most industries, there is a specialized language involved with business credit reports and ratings.

The following is a list of some of the most common concepts and terms as well as their definitions:

Average High Credit / Highest Credit

In order to put a business’s credit in perspective, these are based on the total amount of credit owed as compared to the industry as a whole.

Business in Good Standing

Includes any problems with the business overall.

Commercial Credit Score

A D&B prediction regarding the chances of an account becoming severely delinquent within one year.

Comprehensive Report

This is a combination of several D&B business credit reports that paints a more complete picture of the company’s credit history. It includes the results of the PAYDEX analysis, a company’s credit score and Financial Stress class, as well as any public filings or liens, the business’s history and operations (including when it filed for incorporation, annual financial statements, facilities, affiliations, and number of employees).

Credit Score Class

This is part of the D&B assessment that gauges payment habits to determine how likely it is that a potential account will be delinquent in the next 12 months. The scoring can range from 1 to 5 with 1 being the score assigned for the lowest risk and 5 for the highest.

Financial Stress Score

This is part of the D&B assessment that analyzes the Financial Stress that a business is experiencing in order to predict how likely it is that a business will fail in the next 12 months.

PAYDEX

This is D&B’s primary assessment that analyzes how likely it is that a company will make its future payments on time.  An 80 paydex score for a business can be compared to having a 720 personal credit score.

Sample business credit reports:

Dun & Bradstreet business information report sample

Dun & Bradstreet enhanced comprehensive report sample

Dun & Bradstreet Credit eValuator Plus Report sample

Corporate Experian Business Credit Score Report sample

Small Business Equifax Commercial Credit Report sample

 

To order business credit reports:

Dun & Bradstreet (D&B)

Equifax Small Business Enterprise

Experian SmartBusinessReportsTM

Every business will at one point require an influx of cash in order to cover operating expenses, expansion costs, legal fees, inventory or a range of other items the business may require in order to operate. The worst mistake you can make is seeking funding when your business needs it most. Lenders extend cash credit lines to businesses that don’t need the capital and have strong business credit ratings. Start digging your well before your business gets thirsty!

Are you ready to start building your business ratings? Become a member of my Business Credit Insiders Circle and gain access to a proven step by step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) => 

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit solutions membership helping business owners build small business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Filed Under: Business Credit Tagged With: business credit, business credit file, business credit rating, business credit ratings, business credit report, business credit score, corporate credit rating, corporate experian, dun and bradstreet, paydex, paydex score, small business equifax, smart business reports, start business credit

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