Business Credit Score: What It Means & Why It Matters

Business Credit Score: What It Means & Why It Matters
Eric Goldschein
on March 23, 2020
Read in 12 min

A business credit score (or business credit rating) is a lot like a personal credit score.

It’s a number that represents whether lenders can trust that business to pay back a loan.

If you’re a business, you likely have a personal credit score (also known as a FICO score) as well as a separate business credit score that you should monitor and improve whenever possible.

While some factors are out of your hands, such as risk factors for your industry, your business credit score is something you can alter with responsible spending practices and due diligence.

A good business credit score is key to financing an emerging, growing, or even robust business.

Just because you don’t know your score doesn’t mean others don’t—

And lenders of all sizes will use it to assess whether you’ll be getting that much-needed business loan.

So let’s review what goes into establishing business credit, what makes for a good (or bad) credit score, how you can check it, and everything else you might want to know.

What is a Business Credit Score?

A business credit score is usually a number from 1-100 that tells potential financiers, be they traditional banks or alternative lenders, whether your business is a good investment for them.

It also gives them an idea of how much to lend to you, and on what terms.

A high credit rating may indicate that your business has taken out loans in the past and repaid them in a timely fashion (or even ahead of schedule).

It shows you haven’t overextended your business with a number of other loans that might be difficult to pay back.

A low rating is the opposite, of course:

You’ve been late on payments, you’ve had bankruptcies against you, and you’ve loaded up on business loans.

Business Credit Score – Establishing Credit

Your business credit score doesn’t simply appear out of thin air when you decide to start a business.

There are a few steps you can take to establish your credit and begin to build on it:

  • Incorporate or form a limited liability company (LLC). You need to officially create a business entity separate from your individual person.
  • Obtain a federal Employer Identification Number, also known as a Federal Tax Identification Number. The IRS uses this number to identify taxpayers who need to file their business tax returns.
  • Open business bank accounts under your legal business name.
  • Create a business phone line in your legal business name and list it.

Once you do all this, your business credit history officially begins.

You’ll be able to request your business credit score and start requesting business credit.

Factors that affect your business credit score:

  • Payment history: How have you been regarding your payments to past lenders? Are you timely and responsible, or do you have a history of late or missing payments?
  • Length of credit history: They say that the best credit is old credit, meaning that a well-established history of making payments is better than little or no history at all (even if some were late.)
  • Credit utilization ratio: How much do you owe on your existing credit lines in relation to their limits? If you’re maxing out all your lines of credit, that’s a warning sign for future lenders. Try to keep your ratio at or below 30 percent of your total credit available.
  • Public records: Have you filed for bankruptcy? Are there civil judgments or tax liens against your business? These documents are a matter of public record and can be viewed by anyone.
  • Company size: Some lenders are averse to lending to businesses of a certain size, though this can vary.
  • Risk factors: Some businesses are riskier than others based on their industry; others are considered riskier just because of their location (i.e., in a town with a low population density). Your score can be affected by these factors and more.

Business Credit Score vs Personal Credit Score

While both business credit scores and personal credit scores convey a similar message, there are a number of important differences between the two that can help you understand exactly what your business credit score means.

One notable area of difference is credit score range

Personal FICO scores range from 300 to 850, with 850 being a “perfect score.”

Business credit scores go from 0 to 100 (like the Drake song.)

You can also request additional scores to assess business risk from certain bureaus.

Another is standardization

Each credit bureau that calculates personal credit score uses Fair Isaac Corp.’s algorithms.

But there is no such standard algorithm for calculating a business credit score, which means you can have markedly different scores from bureau to bureau.

Credit scoring criteria is also different for businesses

The data that business and personal credit bureaus use to determine their credit rating are not the same.

Though your business credit score may be calculated only using accounts under the business name, some credit bureaus also offer a “blend” of personal and business factors in their calculations.

On the other hand, a business score can’t affect your personal score one way or the other.

With that being said, many lenders will consider BOTH types of scores when deciding whether to extend you a credit card, line of credit, or other forms of financing.

This is why it’s crucial to keep both your personal credit score and your business credit score in good shape.

Business credit scores are not private

In terms of privacy, your personal credit score is your business and yours alone, unless you open it up to select parties.

But business credit reports are everybody’s business.

All the information is public, so anyone can pay to take a look at your business’ credit rating, like, say a nosey rival, or a would-be business partner.

Checking your business credit report will cost you

Speaking of which, the final major difference is that while personal credit reports can be requested for free once a year from each of the three major consumer credit bureaus, a business credit report and score costs money to access.

Depending on the bureau you use, a report can cost somewhere between $36 and $99.

How is Business Credit Score Calculated?

As mentioned above, the three major business credit bureaus (Dun & Bradstreet, Experian, and Equifax) all use different algorithms to determine your score.

You may want to request versions from each of them to compare and see what one bureau might have considered that the others didn’t.

In any case, Dun & Bradstreet is widely considered to be the preeminent name in business credit reporting.

They have a database of information on hundreds of millions of companies worldwide, and your business can become a part of that database if you apply for a DUNs number.

It’s free to apply for this nine-digit number, and some institutions may require it before working with a particular business.

Dun & Bradstreet reviews payments such as paying back lenders for their loans, paying suppliers for raw materials, paying utility and insurance companies, and paying to lease assets such as equipment and vehicles.

How can I request my business credit score, and what do I get?

Business credit scores through Dun & Bradstreet

For $61.99, you’ll get a business credit report including your business credit score, credit risk score, their PAYDEX score, & a financial stress score.

  • The commercial credit score appears on a scale from 101 to 670, where 101 represents the highest probability of delinquency and 670 represents the lowest risk for lenders.
  • The D&B PAYDEX Score ranges from 1 to 100, with higher scores indicating better payment history.
  • The commercial credit risk classification is from 1 to 5, with 1 being the best.
    It matches your business with other businesses with similar histories, in order to give lenders an idea of how you might pay back a loan from them over time.
  • The financial stress score (also a 1 to 5 range), matches you with businesses with similar attributes, such as size, age, or industry. This shows lenders how businesses with those characteristics normally payout. It’s not a reflection of your actual payment history, but an approximation of what to expect.

This is comprehensive and wide-ranging of the packages you can get, but it may not provide everything you need to know about your business credit score.

Business credit scores through Equifax

For $99.99, you’ll get a business credit report, including public records and a business failure score, which can help you identify if you’re at a higher risk of failure than others.

  • Experian’s credit risk score ranges from 102 to 992 (there’s a reason for those numbers, we’re sure), and takes into account company size, existing available credit limits, length of credit history, evidence of delinquent non-financial transactions.
  • The business failure score ranges from 1,000 to 1,880 (again, there’s probably a good reason for that), and takes into account the length of credit history, the credit utilization ratio over the past three months, the worst payment status on trades over the past two years, and evidence of delinquent non-financial transactions. Long story short: It indicates how likely your business is to close.

Business credit scores through Experian

For $36.95, you’ll get a basic business credit score report.

  • It does include a risk classification, ranging from 1-5 (with 5 being the riskiest), to accompany your 0-100 score.

Many basic factors go into Experian’s CreditScore report, including years in business, other lines of credit you’ve applied for in the last nine months or opened in the last six, percent of available credit used, collections amounts over the last seven years, late payments, number of non-net-30 lines of credit, and more.

One important distinction to make is that small businesses are more likely to get a “medium-low risk” assignment from Experian, regardless of whether they’re responsible with credit.

This is thought to be because small businesses have less access to resources, leaving them vulnerable to changes in the business climate and economy which can lead to an unforeseen inability to pay back the loan.

Larger companies, which are less susceptible to economic volatility, can more easily obtain the “low-risk” rating.

What’s considered a “good” or “bad” score?

Though each bureau calculates scores differently, the score will still be applied along the 0 to 100 scale, with any score over 80 qualifying as good credit.

If you have a business credit score of 80 or above, lenders are more likely to extend generous terms to you when offering a loan.

Let’s get more specific:

  • A PAYDEX score of 100 from Dun & Bradstreet means you consistently pay your loan back as much as 30 days before they’re due.
  • A score of 80 means you pay on time.
  • Anything from 50-79 means you have “fair” credit, which can include some late payments.
  • But if you drop below 50, it takes you months to pay back your creditors, and that’s a problem.

But these numbers mean something slightly different when it comes from Experian’s Intelliscore Plus.

  • Anything above a 75 here is considered good, or low-risk.
  • A 26-50 score is considered a “medium” risk.”
  • If you’re in the 1-10 range, you’re high-risk.
  • A zero, in most cases, indicates bankruptcy.

There are other types of business credit score ratings that don’t fall into the 0 to 100 range.

For example, FICO has a Small Business Scoring Service (FICO SBSS), which goes from 0-300.

  • If you have a score of 140 or above, you can qualify for the Small Business Administration’s 7(a) loan.
  • However, a slightly higher score (usually above 160) is needed to satisfy traditional banks.

What does knowing your business credit score do for you?

Knowledge is power, and nobody likes surprises.

You may have a young business, or even a business that’s been around for some time, and think you have pretty good credit.

Then when you go to apply for a loan, you get rejected, or you are offered brutal terms with a high-interest rate, a low credit ceiling, and a short window for repayment.

If you’d known your score ahead of time, you could either a) be prepared to accept unfavorable terms, b) go with an alternative lender that doesn’t weigh credit score as heavily or c) look to improve your score. (More on that coming up.)

One reason for staying aware of your business credit score is that sometimes, the data bureaus are using to analyze your business are wrong.

If you can provide proof that the data being utilized are wrong, you can correct it and get the bureaus to update your information.

Another issue is that credit scores can change quickly.

Within a month or two of a check, your business credit score can go from good to bad without you even realizing it.

To counteract this, some people choose to pay a fee for regular credit monitoring.

All three of the major bureaus offer this service, which gives you unlimited access to your score rather than requiring you to pay for a new report every three months.

Fees vary depending on the bureau and what type of monitoring you request.

Some services can send alerts to you regarding bankruptcy, judgments, liens, and large drops in your score.

This is helpful for identifying business identity theft before it becomes a major issue and harms your credit.

Improving Your Business Credit Score

Let’s say, for whatever reason, you don’t have a good business credit score.

Or maybe your score is pretty good, but it could be better.

It’s never too late to turn your credit history around and start building a score that better reflects responsible business practices.

Here are a few ways to start improving your score and making your loan applications more desirable to lenders:

1) Start paying your bills on time, or early, if possible.

When you accept a loan, you’re asking for a significant amount of money that you promise to pay back by a certain time, and failing to do so isn’t a good look.

By establishing a history of repayment (or better yet, paying back your debts before they’re even due) you can start pushing your business credit rating in a positive direction.

2) Continue using the credit you do have.

Earlier, we touched on the fact that an unbalanced credit utilization ratio is a detriment to your credit.

But this goes both ways:

It’s important to continue using what credit you do have, in order to demonstrate your continued willingness and ability to manage your finances on credit.

If you see your business credit score is suffering, don’t start paying for everything in cash.

Instead, engage in using your credit responsibly.

3) Maintain valuable lines of credit.

Trade credit (credit extended to your business by vendors and suppliers) is thought to be the most important of the credit types.

If you don’t pay those parties back promptly, you’ll stop getting materials and inventory (and likely won’t have a business anymore.)

If you build fruitful partnerships with other businesses in this manner, you’ll have a much higher business credit rating than if you simply buy a few things on a credit card every once in awhile.

4) Keep your personal credit score in good standing.

It’s true, we already discussed the fact that business and personal credit are two different things.

But again, that doesn’t mean your personal credit isn’t taken into consideration here.

The FICO SBSS score accounts for personal credit, for example.

And if you’re on the borderline with a lender, a good personal score might make the difference between an extra point or two on your interest rate.

Why not just use a personal loan to fund my small business?

If you don’t have great business credit, you may have been happy to hear that your business credit doesn’t affect your personal score, because then you can use your personal score to obtain a personal loan, and just use that for your business.

And sure, that’s a possibility, especially if the loan amount you’re looking for is small and you don’t have much collateral to offer.

Traditional lenders are less likely to loan out a business loan for less than $25,000 since the interest yield isn’t worth it to them.

In addition, if you have a brand new business lacking in reliable cash flow and other visible signs of success, a small personal loan might be the way to go.

But part of running a business is maintaining a good business credit score. If you’ve had your business for awhile and you’ve yet to rack up any sort of lending or credit history, that’s not a good sign, and won’t serve you well in the long run.

If you’ve had your business for awhile and you’ve yet to rack up any sort of lending or credit history, that’s not a good sign, and won’t serve you well in the long run.

Why? Remember: A good credit score isn’t just important for obtaining a loan from a lender such as a traditional bank.

Because remember: A good business credit score isn’t just important for obtaining a loan.

Any vendor or business that could do business with you on credit may look at your credit score and decide not to work with you if they’re unsatisfied with your history.

That includes insurance firms and leasing companies, but also nonfinancial firms like manufacturers, wholesalers, and business service firms.

Basically, a good credit score is the lifeblood of a successful business. Without it, you may not be able to obtain the goods and services you need to keep the lights on.

Without it, you may not be able to obtain the goods and services you need to keep the lights on.

What Should You Do with this Information?

Armed with information about the state of your credit score—be it good, bad, or somewhere in the middle—you can confidently go forth with a plan for obtaining the financing or credit you need to run a successful, growing business.

Maybe you need to work on improving your score—and that’s okay.

Or perhaps you have a great score and you’re ready to apply for a loan from the SBA, or any of the other traditional or online lenders inhabiting the lending space now—and that’s great.

You can also start acquiring larger amounts of inventory, raw materials, and services on credit that may have eluded you in the past.

This is one of the shortcuts businesses use to move from a small business to a larger, more profitable enterprise.

Your business credit score is ever-changing, susceptible to slight changes or honest mistakes (on your end or due to the errors of others) that can mean the difference between tough or lenient lending terms.

Keep an eye on it, keep it in good standing, and you could have access to business loans and credit when you need it.

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Eric Goldschein Finance Journalist

Eric Goldschein is a freelance journalist who covers entrepreneurship, small business trends, emerging technologies, culture and sports.

He was previously the managing editor of, and has written for Business Insider, Trep Life, the Huffington Post, Fundera and more.