We’ve provided a brief overview of personal credit below to illustrate some of the similarities and differences compared to business credit scores.
Personal Credit
A personal tradeline is any extension of credit, e.g. loan or credit card, that is reported to one or more of the three major consumer credit bureaus; Equifax, Experian, or TransUnion. The credit bureaus use personal tradelines and other personal credit related information to generate your personal credit scores for lenders, typically a FICO® Score or VantageScore® credit score and credit report. Credit Strong provides a comprehensive overview of the factors that impact your personal FICO Score and provides a FICO Score 8 for free with all of its personal Credit Strong credit builder accounts. FICO Score 8 is the most commonly used consumer credit score. Personal credit scores typically range from 300 to 850.
Business Credit Scores
There are more national business credit bureaus than consumer credit bureaus and a wider variety of business credit scores and factors that impact those scores.
Business Credit Tradelines
There are two types of credit tradelines for a company, a financial tradeline and a vendor tradeline.
- Financial Tradelines: A financial tradeline is an extension of credit from a bank or financing company, for example a business loan from a bank, commercial credit card, or equipment lease financing.
- Vendor Tradelines: Vendor tradelines can have a variety of names, such as merchant tradeline, supplier tradeline, vendor tradeline, trade credit, vendor account, or even a corporate tradeline. Regardless of the name, a vendor tradeline is a report from a merchant or supplier to a business credit bureau about a specific company’s payment history when the supplier or merchant has extended them credit. An example of this would be an office supply company extending net-30 terms to a customer to pay an invoice for a delivery of office supplies.
Some business credit bureaus only collect financial tradelines, some only collect vendor tradelines, and some combine both types of tradelines. All business credit bureaus combine additional information about a company with the tradelines they collect to generate a business credit score or assessment of the creditworthiness of your business. Some business credit bureaus also include information about the company’s principals (owners or individuals that control the company) in the credit file for the company.
Which type of tradeline is more important? Well, it may depend on your objective. If your goal is to get net-30 terms with a supplier, they will typically look at your payment history on similar types of vendor tradelines. If your goal is to get a loan or credit card for your company, a financial tradeline is likely going to be more important to the lender.
Credit Strong business credit builder accounts offer a $10,000 installment loan financial tradeline.
Business Credit Bureaus and Business Credit Scores
While there are just 3 major consumer credit bureaus, there several business credit bureaus. Some of the major national business credit bureaus and business credit scores are listed below.
PayNet
PayNet is one of the leading financial tradeline focused credit bureaus. The primary score used by lenders using PayNet to make credit decisions is the PayNet MasterScore. The PayNet MasterScore is calculated using the largest database of business loans and term leases in the nation. The PayNet MasterScore is used primarily for financial institution lending and leasing decisions. PayNet was acquired by Equifax in 2019 and operates as an independent division of Equifax.
PayNet MasterScores range from 500 to 800, the higher the score the better, a company’s score will report as “null” if the company does not have any credit history reported to PayNet.
A sample of score ranges and default rates for PayNet MasterScore V2 is presented below.
| Score Range | Risk Description | Bad Rate |
|---|---|---|
| 700 – 800 | Low | 1.1% or less |
| 660 – 699 | Low – Medium | Low – Medium |
| 630 – 659 | Medium | 9.0% to 4.1% |
| 590 – 629 | Medium – High | 21% to 9.1% |
| 500 – 589 | High | Greater than 21% |
Equifax
In addition to being one of the major consumer credit bureaus, Equifax is also one of the nation’s leading business credit bureaus. Equifax offers multiple business credit scores. Two of its primary business credit scores are the Equifax Business Delinquency Score, which predicts the likelihood of severe delinquency on a vendor or supplier account and the Equifax Business Delinquency Financial Score which determines the likelihood of severe delinquency on financial accounts. Equifax business credit scores include both company principal and company credit information.
All Credit Strong Business Credit Builder Accounts include a monthly Equifax Business Delinquency Financial Score grade for free so you can track progress in building business credit for your company.
Equifax Business Delinquency Financial Scores range from 101 to 650, the higher the score the better, or “0” if the company has a bankruptcy, and “null” if it has no credit history.
| Score Range | Risk Class | Risk Description | Bad Rate |
|---|---|---|---|
| 585 – 650 | 1 | Low | 0.57% |
| 554 – 584 | 2 | Low – Moderate | 0.98% |
| 465 – 553 | 3 | Moderate | 3.93% |
| 299 – 464 | 4 | Moderate – High | 21.2% |
| 101 – 298 | 5 | High | 75.3% |
Dun & Bradstreet PAYDEX Score
Dun & Bradstreet is a business credit bureau that collects information on vendor tradelines. D&B calls these ‘Trade References’. These records can include on-time and early payments or overdue debts and bills that have been sent to collections.
The PAYDEX Score is a dollar-weighted indicator intended to reflect a business’s past payment performance. Companies receive a score between 1 and 100, where a higher number represents a greater likelihood that a business will pay its debts on time. The PAYDEX score is based entirely on payment history.
PAYDEX is primarily used by vendors and suppliers to judge a company when determining what terms to extend on trade credit (e.g., net 30, net 60, etc.) Typically, the better the score, the more generous the terms extended by the vendor. Your PAYDEX score can be important if you are seeking vendor terms or vendor financing, because having more time to pay your bills may improve your company’s cash flow.
Dun & Bradstreet may consider trade references from up to 875 individual vendors when determining your company’s PAYDEX Score and your company will need about 3 vendor tradelines reported to generate a PAYDEX score.
High
Risk
0-49
Payments are made more than 30 days late.
Medium Risk
50-79
Payments made 15 to 30 days late.
Low
Risk
80-100
Payments made on time or early.
| PAYDEX Score: | Explanation: |
|---|---|
| 100 | Payment comes 30 days before due date |
| 90 | Payment comes 20 days before due date |
| 80 | Payment comes on due date |
| 70 | Payment comes 15 days after due date |
| 60 | Payment comes 22 days after due date |
| 50 | Payment comes 30 days after due date |
| 40 | Payment comes 60 days after due date |
| 30 | Payment comes 90 days after due date |
| 20 | Payment comes 120 days after due date |
| 1-19 | Payment comes over 120 days after due date |
Experian
Experian is a business credit bureau as well as one of the three major national consumer credit bureaus.
Intelliscore Plus is Experian’s premier business credit scoring model. To calculate the score, Experian pulls over 800 company and owner datapoints from public records, your personal credit file, and public filings. The formula Experian uses to calculate the score is proprietary so the exact details of how each factor impacts the score are not publicly available. Experian does provide general information on what factors impact the score.
Factors that impact Intelliscore Plus
Payment History
Just like with your personal credit score, payment history is the primary factor that impacts your business credit score, so it’s important that your company makes payments on time and that it avoids missed payments or delinquent accounts.
Negative Factors
Negative factors include any accounts have been sent to collections, any company or personal liens and judgments, and any bankruptcies related to your personal or company accounts. Trends can also be considered in this factor, such as your payment patterns, i.e. are you or your company consistently slow or late with a payment? Have you started paying bills late or started making more payments on time?
Fiscal
This factor focuses on your credit utilization. For example, how much of your available credit are you currently using? Is there a high ratio of delinquent balances compared to total credit limits?
Intelliscore Plus scores range from 1 to 100 and a higher score indicates lower risk.
| Score Range | Risk Grade | Risk Description | Bad Rate |
|---|---|---|---|
| 76 – 100 | 1 | Low | 1.7% |
| 51 – 75 | 2 | Low – Medium | 4.4% |
| 26 – 50 | 3 | Medium | 10.0% |
| 11 – 25 | 4 | Medium – High | 19.1% |
| 1 – 10 | 5 | High | 50.8% |
Small Business Financial Exchange (SBFE)
The Small Business Financial Exchange is similar to a credit bureau, but it is technically a data exchange for small business credit information. It was established in 2001 and is member-owned by small business lenders. Members of the SBFE contribute data on companies they do business with, in exchange they can access data and credit reports generated by SBFE certified vendors. A lender must provide information to the SBFE to get information from the SBFE. SBFE membership is only open to companies that originate small business credit obligations, own small business credit obligations, or service small business extensions of credit. For example, banks, credit unions, credit card issuers, and leasing companies can all be SBFE members.
The SBFE collects and distributes data elements for small businesses, including the following
-
Loan payment information. This includes payments your company makes, or does not make, on time to vendors, lenders, or suppliers and your credit limits for any business accounts.
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Business lease payment information and history.
-
Credit card payment history
-
Business identification information. For example; legal business name, EIN, DUNS number, corporate address, and NAICS code.
Unlike the other business credit bureaus, the SBFE does not calculate or provide credit scores. The SBFE provides data it collects to a limited set of vendors such as, Equifax, Experian, Dun & Bradstreet, and LexisNexis who incorporate that data into the business credit scores they offer to other members of the SBFE.
FICO Small Business Scoring Service Score (FICO SBSS Score)
In addition to providing the most used credit models for consumer credit scoring, FICO also provides the business credit scoring model that has been used since 2014 by the Small Business Administration (SBA) for all SBA 7(a) and Community Advantage loan decisions up to $350,000 (excluding SBA Express and Export Express).
A FICO SBSS Score is a hybrid combination of personal and business credit. To calculate the FICO SBSS, FICO uses both the information in business owners’ personal credit profiles and the business’s credit profile to determine a company’s FICO SBSS Score. The personal credit component of the FICO SBSS score includes the personal credit of up to five owners, any individual with 20% or greater ownership, so it’s important to build your personal credit as well as your business credit for the FICO SBSS Score if your end objective is to obtain a SBA 7(a) loan. In addition to credit information, FICO also includes other details about a business like how long the company has been in business and how many employees the company has.
FICO’s Small Business Scoring Service rank-orders loan applicants by their likelihood of making payments on time. The FICO SBSS score ranges from 0 to 300. The higher the score, the better. A strong history of business credit with timely payments to lenders and suppliers will likely improve a company’s SBSS score.
As of October 1, 2020, the minimum FICO SBSS score required to pass the SBA’s pre-screen process was 155, but many SBA lenders use a minimum score of 160 to 165. If a company’s FICO SBSS score falls below the required threshold of 155 its loan application must go through a manual approval.