A business score, often called a business credit score, measures a company’s financial health and its capacity to manage obligations. Like personal credit scores, this number provides a snapshot of creditworthiness, helping external parties assess the risk of extending credit. The score summarizes a company’s financial history into a single figure that dictates many future financial opportunities. Understanding this score is fundamental because it influences a business’s ability to secure capital and establish favorable commercial relationships.
Understanding the Purpose of Business Scores
Business scores transform a company’s financial history into a standardized assessment of risk for potential partners. Lenders, suppliers, and insurance carriers use this rating to predict the likelihood of a company defaulting on a financial commitment, typically within the next 12 months. This enables a swift, objective evaluation of creditworthiness, streamlining decision-making processes for third parties.
The scores communicate a company’s payment reliability and stability, establishing trust in the commercial ecosystem. They allow vendors to determine appropriate payment terms, such as Net 30 or Net 60, and help banks set interest rates and credit limits on loans. The business score is a predictive tool that quantifies the financial risk associated with extending credit or entering into a contract.
The Major Business Credit Scoring Agencies
Multiple organizations generate distinct credit scores, each using proprietary models. The three major agencies in the United States are Dun & Bradstreet, Experian, and Equifax. Businesses often have multiple scores because each agency utilizes different data inputs and scoring methodologies.
Dun & Bradstreet (D&B)
D&B is known for its PAYDEX score, which focuses on the timeliness of payments to vendors and suppliers. D&B also calculates a Financial Stress Score and a Commercial Credit Score. These scores predict the likelihood of business failure or severe delinquency.
Experian
Experian produces the Intelliscore Plus, which incorporates over 800 variables. This score predicts the probability of a business becoming seriously delinquent.
Equifax
Equifax offers several scores, including the Business Credit Risk Score, which predicts the likelihood of a company becoming delinquent by 90 days or more. Equifax also provides a Business Failure Score and a Payment Index score that measures payment promptness. Businesses must manage their credit profile across all three major reporting bodies since different agencies report to different data sources.
What Constitutes a Good Score
Defining a “good” business score depends on the specific scoring model and the agency’s range. The Dun & Bradstreet PAYDEX score uses a scale of 1 to 100. A score of 80 to 100 is considered low risk, indicating payments are made promptly or early.
Experian’s Intelliscore Plus also uses a 1 to 100 range. A score of 76 to 100 is categorized as low risk, placing the business in a favorable position for credit approval. Scores between 51 and 75 are considered low-to-medium risk. Lenders often seek scores in the high 70s for the most competitive financing terms.
The Equifax Business Credit Risk Score ranges from 101 to 992. Scores above 750 reflect a low likelihood of severe payment delinquency, while scores above 550 are generally considered good standing. For the Equifax Payment Index (out of 100), a score of 90 or higher indicates a positive payment history. Higher scores consistently correlate to a lower risk perception by creditors.
The Importance of Maintaining a Strong Business Score
Maintaining a high business score translates into financial benefits that support growth and operational efficiency. A strong score is often the prerequisite for securing financing, influencing a lender’s decision to approve a loan or line of credit. Businesses with excellent scores are typically offered more favorable interest rates, resulting in substantial savings.
A high score improves a company’s negotiating position with vendors and suppliers. A favorable credit profile often allows a business to qualify for extended payment terms, such as Net 60 or Net 90, which improves cash flow management. Insurance providers may also use the score when determining policy premiums.
Primary Factors That Determine Your Business Score
The calculation of a business score is driven by several components, with payment history being the most heavily weighted factor across all major agencies. This factor measures a business’s timeliness and consistency in paying its trade accounts, suppliers, and lenders. Scoring models use metrics like Days Beyond Terms (DBT) to quantify how many days past the due date a payment was received.
The credit utilization rate is another significant determinant, comparing the total amount of debt owed against the total available credit limit. Maintaining a low utilization rate, ideally below 30% of the available credit, demonstrates prudent financial management. The age of the business credit file also plays a role, as a longer history provides more data to predict future behavior.
Public records are also factored into the score, with negative items like liens, judgments, and bankruptcies severely impacting a company’s rating. These records indicate financial distress and signal a higher risk to potential creditors. The number of recent credit inquiries can also affect the score, as a high volume of applications in a short period may suggest an urgent need for capital.
Actionable Steps to Improve Your Business Score
A foundational step in improving a business score is ensuring the company is formally recognized by the major agencies, starting with obtaining a D-U-N-S number from Dun & Bradstreet. Businesses must prioritize paying vendor invoices and loan installments on time, or even early, since payment history has the greatest impact on the score. Paying early is particularly effective for boosting a D&B PAYDEX score.
Businesses should take the following actions:
Actively manage the credit utilization rate by keeping balances low relative to credit limits.
Regularly monitor business credit reports from all three agencies to identify and dispute errors or outdated information.
Establish trade relationships with vendors and suppliers that report payment activity to the credit bureaus.
Maintain a clear separation between personal and business finances using dedicated business bank accounts and credit cards.
Using dedicated business accounts ensures that financial transactions are appropriately tracked and reported. These proactive measures allow a business to build a robust financial history that supports a strong business score over time.