Business Credit Scoring 101
Your business has its own credit profile and score linked to your business
EIN number. 3 main business reporting agencies provide your business
credit profile and score Dun & Bradstreet, Experian, and Equifax.
Commercial. A business credit score is a mathematical model that is used to
depict a business’s risk of going 90 days late on an account within the next
12 months, while consumer scores depict risk over a 24-month time frame.
A business credit score reflects the business’s likelihood of defaulting on an
obligation, not the business owner’s. The business credit score is based on
how the business obligations are paid, not how the business owners pays
their personal obligations.
Each reporting agency provides access to multiple business credit scores that
evaluate different forms of risk. FICO also provides its own business credit
score to assess business risk. And banks have their own internal bank credit
score that’s used to determine business loan approval. These scores are used
by credit issuers, lenders, suppliers, vendors and others who typically extend
credit to businesses
YES, your business credit scores ARE used each and every time you apply
for credit and financing for your business. But lenders and credit issuers will
NOT tell you this, nor tell you which scores they’re using to assess your
business. There is no Fair Credit Reporting Act in the business world that
requires them to do so as there is in the consumer credit world.
It’s also important to note, that your business credit profile and scores are
available to ANYONE who wants them. In the consumer world someone
needs your permission to pull your consumer reports, something the FCRA
calls “permissible purpose”. But there is no FCRA in the business world,
so anyone who wants your reports can easily and cheaply get them including
competitors, prospects, clients, lenders, and more.