Business Banking

What is a good business credit score?

The most popular credit reporting companies, including Experian and Dun & Bradstreet, rank business credit scores from 1 to 100. The higher the value, the better your company’s creditworthiness.

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The most popular credit reporting companies, including Experian and Dun & Bradstreet, rank business credit scores from 1 to 100. The higher the value, the better your company’s creditworthiness. Thus, a good business credit score is a number that tends close to 100.

For example, a good business credit score under Dun & Bradstreet’s PayDex ranking starts from 80 all through 100. If you’re using Experian’s Intelliscore Plus, then a good business credit score is any value between 76 and 100.

Business credit score range based on reporting company

PayDex by Dun & Bradstreet

Intelliscore Plus by Experian

SBSS by FICO

While the business credit score range used by PayDex and Intelliscore maxes out at 100, FICO SBSS uses a range from 0 to 300. The higher the value, the more creditworthy your business is. Most lenders will require a FICO SBSS score of at least 40 before extending loans and credit facilities. For example, you can prequalify for an SBA 7 (a) loan with a 140 or more. Some lenders, particularly commercial banks, may need a higher value of 160 or more. However, in most scenarios, the magic number to work with is 140.

The bottom line

Unlike personal credit score which is pretty much standardized, business credit ranking varies depending on the reporting company. Therefore, to know your company’s exact credit score, consider checking reports from the three main business credit bureaus (i.e., Experian, Dun & Bradstreet, and FICO SBSS). Nonetheless, a higher score will always indicate a better standing in creditworthiness. That’s what you want for your business. Check out this article for more information on how business credit works and where you can find a sample report.



Why is a good business credit score important?

With a good credit score, you can get access to a wider variety of credit facilities, lower interest rates, good credit terms, and an excellent relationship with your creditors. Here’s a more detailed explanation why a good business credit score matters:

Your business will easily qualify for loans

As a small business owner, almost every lender will check your personal and business credit before approving your business’s loan application. This helps them determine if you’re a diligent creditor who pays debts on time.

Most of them will be hesitant to lend your business money if they discover that your business has a poor credit history. Usually, a bad credit indicates that you won’t be able to make timely payments, or you may default the loan altogether.

Generally speaking, your business will qualify for most loans with a PayDex score of 80, Intelliscore of 76, or FICO SBSS of 160. Some lenders may consider a slightly lower score, especially for certain types of credit like business line of credit and business credit card.

Your business will qualify for more types of loans

Qualifying for a loan is great, but qualifying for various types of loans is even better. You get to choose a loan product that meets your financial needs and suits your cash flow.

A bad business credit locks you out of certain loans. For example, most SBA loan lenders require a credit of at least 140 FICO SBSS or 80 PayDex. If your business score is lower than that, you’ll automatically be ineligible. In fact, you’ll also be ineligible for most other bank loans. Your business might be forced to rely on credit cards and lines of credit. Both are good for business purchases but not ideal for business growth because they don’t typically carry large amounts that you can properly invest in growth.

You’ll get better loan terms

Lenders are more open to offering favorable loan terms to businesses that are creditworthy. You can, for example, get lower interest rates on a loan if you have a high credit score. Similarly, a lender may offer your business a higher credit limit because of a good credit score. Such terms, particularly favorable rates, can save you thousands of dollars in interest payments.

Your business will receive favorable terms from suppliers

It’s not just loan lenders who consider business credit, vendors do too. A good business credit score bodes well to suppliers because it makes you a low-risk creditor. It tells them that your business is financially healthy and capable of paying its debts on time. They’ll feel comfortable extending you credit, which can greatly help your cash flow. You can even get essential items like inventory on credit.

It protects your personal finances

If your business has good credit, you can use its credit score almost exclusively to qualify for business loans. This leaves out personal credit (and personal guarantee). In other words, business liabilities won’t be reported on your personal credit history. Because of this, your personal credit score won’t be impacted by your business activities.

That said, you still want to maintain a good personal credit score, especially if you’re a sole proprietor, independent contractor or single-member LLC. While lenders may use your business credit to qualify the business for loans, they’ll cross reference it with your personal credit.

How to achieve a good business credit score

Similar to personal credit, business credit score is a function of many components. It’s determined by a variety of business and financial activities, including available credit, punctuality in payment, credit utilization and so on. Of course, all these things center around debt management.

Therefore, the best way to achieve a good business score is to maintain discipline when handling business debts. Here are a few things that you can do to achieve a good business credit score.

Use credit

You can’t build business credit unless you get and use credit. If you have any lines of credit or business credit cards, make sure to utilize them. And if your cash flow allows it, you can take out a loan. Just make sure that whatever credit facility you commit to is one that you can repay in a timely manner. Otherwise, missing or delaying payments will hurt your business credit score.

Pay early

Credit score bureaus usually calculate scores based on how quickly your business settles its financial obligations. Paying company debts on time lowers your risk level as a borrower. Paying them earlier than they are due lowers your risk level even more. It shows that your business is capable of meeting its financial debts efficiently.

This applies to business bills as well. Whether it’s rent, lease agreements or what have you, you’ll want to try as much as possible to pay them before their due date. To achieve the best score, consider making payments at least 30 days ahead of their due date. And whatever you do, avoid late payments. If push comes to shove, use one form of credit to pay another. For example, you can take out a loan to settle credit card and line of credit debts.

Maintain trade credits

Trade credits are up there among the most effective tools for building business credit scores. These are credits that are extended to your company by suppliers and vendors. They essentially help your business acquire goods and services without necessarily paying for them instantly.

In addition to easing pressure on your cash flow, trade credits can directly build your business credit score. They are debts like any other and every time you manage them diligently, your credit score improves.

Keep in mind that not all vendors report your business activity with them to credit companies. Therefore, when choosing a vendor, consider asking them to send your payment activity to credit bureaus.

Do not neglect personal credit score

Your business credit is not linked to your personal credit, but they are closely related. That’s especially the case if you are a small business owner. While lenders may use your business score to qualify the business for loans, they will almost always reference it with your personal credit score. In fact, the FICO SBSS score is heavily influenced by your personal credit.

What this means is that if your personal score is less-than-decent, it may prevent your business from accessing forms of credit. Without credit to repay, you can’t improve the credit score. Therefore, while your main focus may be improving business credit, do not neglect personal credit.

Regularly check your business credit report

It’s not uncommon for reporting companies to make mistakes. Whether it’s a clerical error or misattributed value, it will negatively affect your credit score. Oftentimes you’re the one person who clearly understands your financial activity. This makes you the best person to spot errors in credit reports. Make sure to regularly request for them from all the main reporting companies.

Take time to check that every detail is accurate and your business is not suffering a bad score because of a reporting or clerical error. Should you spot an inaccuracy, call it out immediately and have it rectified by the reporting company and associated creditor.

In summary

What is a good credit score? Generally, a good business credit score starts from 80 if you’re using the PayDex index and 76 if you’re using Intelliscore Plus. FICO SBSS considers 140 and above as a good score. These are the numbers to aim for when building a business credit score.

While it’s not the easiest thing to do, improving credit score is not hard either. You can do it with straightforward measures like utilizing credit, paying debts 30 days before their due date, maintaining trade credit and building personal credit alongside business credit.

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