Understanding a good business credit score
Quick insights
- What’s considered a good business credit score depends on which credit scoring model is used. You may have a Dun & Bradstreet® (D&B) Delinquency Predictor Score, Intelliscore Plus℠ or a FICO® Small Business Scoring Service℠.
- Business credit scores can be a helpful indicator of the financial health of your business and may be used to help plan ahead.
- A good business credit score may increase your approval odds for a new line of business credit and may also help your chances of getting more favorable terms.
Having a good business credit score can potentially allow you to access more credit and better terms. Let's review what a good business credit score looks like below.
What is a good business credit score?
A good business credit score depends largely on the scoring model used, as different types of business credit scoring models come with different credit score ranges and interpretations. Let’s breakdown the different business score ranges below.
PAYDEX® score
This score, which was developed by the business credit bureau Dun & Bradstreet (D&B), ranges from 1-100. The higher scores indicate a more positive payment history and may demonstrate to lenders that you are a less risky candidate. Scores that fall in the 50 to 79 range may indicate that you’ve made payments 1 to 30 days late. Scores below 50 may indicate that you’ve made payments over 30 days late.
FICO Small Business Scoring Service
FICO provides small businesses with the SBSS credit score. This score ranges from 0-300; higher scores can indicate that you are lesser risk to potential lenders.
Intelliscore Plus
There are a few versions of this business credit score provided by Experian™. Intelliscore Plus V2 ranges from 1-100 and is broken down into the following risk categories:
- 1-10: High risk
- 11-25: High-medium risk
- 26-50: Medium risk
- 51-75: Low-medium risk
- 76-100: Low risk
The Intelliscore Plus V3, which is the most recent version and comes with improved accuracy, ranges from 300-850. The higher your Intelliscore Plus V3, the better your business credit score is, similar to a personal credit score.
In both versions, the higher your Intelliscore, the less of a risk candidate you are to potential lenders.
Key components that impact your business credit score
Depending on the scoring model used, your business credit score can be influenced by several different factors, including but not limited to:
- Payment history: This demonstrates your ability to consistently make your payments on time.
- Credit utilization ratio: The amount of credit you use against your total available credit. Lower credit utilization ratios (about 30% or less) can reflect positively in your score.
- Credit history: The length of your credit can impact your credit score, with lengthier credit history indicating that you have more experience managing your credit.
Why a good business credit score is important
Similar to personal credit scores, the better your business credit score, the better your chances are for accessing more favorable credit options. For example, a good business credit score may:
- Improve your chances of approval for business loans and other business lines of credit.
- Potentially provide you with lower interest rates.
- Help improve negotiation power with suppliers.
- Increase the odds of more favorable payment terms.
- Enhance the credibility and reputation of a business.
- Potentially lower insurance premiums.
Overall, a good business credit score can reflect well on your business’s financial health, enhancing its reputation with customers and partners and improving your chances of accessing more favorable loan terms and potentially lowering costs.
Steps to building and maintaining a good business credit score
Whether you’re just starting out on your company’s journey or wanting to improve your current business credit score, there are a few ways you can help improve it. Let’s review a few steps you may take to help increase your business credit score:
Step 1. Prioritize making your payments. Payment history is an important part of generating your credit score. The more positive your payment history, the better your chances are of improving your score. If you’ve made late payments or have been inconsistent with your payments, shifting this credit behavior to making on-time payments can help improve or maintain your credit score.
Step 2. Manage your credit utilization. If you are currently using a large percentage of your total available credit (higher than 30%), then you may want to find ways to pay down your balance so that you can lower this percentage.
Step 3. Monitor your business credit score and report. It can be important to review your business credit report and regularly check your business credit score, as you can pinpoint areas for improvement or dispute inaccurate information.
In conclusion
Understanding what a good business credit score is can help you navigate financial decisions and give you an idea of what lines of credit you may be eligible for. A good business credit score may improve your chances for not just approvals, but for more favorable terms as well. This could potentially save you interest costs, allowing for more of your budget to go towards growing and sustaining your business.
