Have you ever wondered what exactly is on your corporate credit report?  For instance, what is it telling lenders about your business? How are lenders using the information in their decision-making process?  Are they simply taking the information at face value? Do they have their own formulas and algorithms that they apply? Your corporate credit report may not be what you think it is. This real corporate credit review will answer these questions and more. 

What Does Your Corporate Credit Report Say About You, and How Do Lenders Use It? 

Before we dive in, there are a few things you need to know.  First, there are many companies from which a lender can pull your corporate credit report.  Next, each company offers lenders more than one report. There is no way to know, without asking the lender directly, which report they will pull from which company.  It could be all, one, or any combination. 

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Lastly, many lenders do actually apply their own formula to the information in the report to calculate a score that they feel is most useful to them.  As a result, they may not even use the actual score on your corporate credit report.  

All of these things are out of your control.  What you can control, to a point, is the information on the report.  For example, does it contain positive information? Is the information on it accurate?  These are things you can work with. If the information lenders are seeing is both positive and accurate, you should be in good shape. However, you cannot do anything about the information on the reports unless you understand what it is they are reporting, and where they get their information.  So here we go. 

Corporate Credit Report: Dun & Bradstreet

Dun & Bradstreet offers six different reports. The one utilized most often by lenders is the PAYDEX. This is most likely due to the fact that it is the one most like the consumer FICO score. It measures how quickly a company pays its debt on a scale of 1 to 100. Lenders like to see a score of 70 or higher.  To put it in perspective, a score of 100 reveals the firm makes payments ahead of time. A rating of 1 shows they pay 120 days late, or more.

Together with PAYDEX, they offer following.

Delinquency Predictor Score

This rating determines the chance the company will not pay, will be late paying, or will come under bankruptcy. For scoring, the range is 1 to 5, with 2 being a good score.

Financial Stress Score

As you might guess, this is a measurement of the pressure on a firm’s balance sheet. It shows the possibility of a closure within a year. The range is 1 to 5, and a 2 is good.

Supplier Evaluation Risk Rating

This is a ranking that predicts odds of a firm surviving one year.  It ranges from 1 to 9, with a 5 being a good score.

Credit Limit Recommendation

As the name implies, this is a recommendation for the amount of debt a company can handle. Financial institutions usually use it to establish how much credit to extend.

D&B Credit Rating

This is an estimation of overall business risk on a scale of 4 to 1, where a 2 is considered good.  The smaller the number the better.  The rating is given in conjunction with letters, the combination of which show a company’s net worth. 

Consequently, if there isn’t enough data on a business to assign a regular rating, an alternative score is assigned. This is called a credit approval score.  It is based on the number of employees. They will use any data they have available to calculate this alternative rating.  That means, a company can control this to a point by ensuring D&B has all of the information they need.

Commercial Credit Score

Along with the PAYDEX, Dun & Bradstreet releases a commercial credit report in three components. Each part shows how likely the business is to default on expenses or become seriously late on payments.

Commercial Credit Score

On a range of 101 to 670, the commercial credit score anticipates the likelihood of a firm making late payments. A rating of 101 indicates it is very likely that the company will be late with payments. Likewise, a score of around 500 is good.

Commercial Credit Percentile

For this measurement, the scale runs from 0 to 100. It shows the chance of delinquency too. However, it determines this probability versus other companies in the Dun & Bradstreet system. A rating of 1 is the highest possible probability versus various other companies. The majority of loan providers consider a rating of 80 or higher to be an advantage.

Commercial Credit Class

In contrast to the other reports, this is an approach of dividing businesses into classes based on the chance of delinquency. Firms in class 1 are the least likely to be overdue. Likewise, if you are in class 2, that’s great.

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What Information is Used to Calculated the Dun & Bradstreet Corporate Credit Report?

Unfortunately, the exact formula that Dun & Bradstreet uses to calculate their rankings is proprietary.  However, we do understand what information they use, as well as where they get it. In fact, the main source of information is the business itself.

You see, a company has to send a financial statement to D&B before getting a complete score. Without that, a business receives a restricted score based on how many workers they have. For example, the ranking would be 1R if the business has 10 employees or even more.  It’s 2R if they have fewer than 2 staff members.

Without financial statements, a composite debt evaluation might still be offered. However, a business is only eligible for a ranking up to a 2 in this situation. They are ineligible for a 1 rating without a financial statement.

Additionally, businesses can submit trade recommendations to Dun & Bradstreet.  However, it costs money to do so. Of course, there is no guarantee it will lead to a score boost. Also, if you are building business credit properly, it will happen for free anyway.  

In addition, Dun & Bradstreet accesses public documents. In doing so, they try to find liens, insolvencies, or anything else that can show creditworthiness, or its absence. 

Corporate Credit Report: Experian Business Credit Scores

Experian gathers data from a lot of the same sources as Dun & Bradstreet. As a result, their reports are similar.  There are a few key differences in sources, calculation, and also presentation however.

Intelliscore Plus

Experian uses the Intelliscore Plus credit score, which shows a statistics-based credit risk. The result is, it is a highly predictive score that can help users make well-informed credit decisions. 

The Intelliscore scores range from 1 to 100, with a higher score indicating a lower risk class. 

Score Range Risk Class

Low Risk	76-100
Low-Medium Risk	51-75
Medium Risk	26-50
High-Medium Risk	11-25
High Risk	1-10

Exactly How Does Experian Compute the Intelliscore Rating?

One of the things Intelliscore is most known for is the identification of key factors that can indicate how likely a business is to pay its debt.  In fact, over 800 variables go into the Intelliscore Plus calculation. Many of them are from the list of general information all credit agencies look at.  However, some are unique to Experian.  So here’s a breakdown. 

Payment History

As you might imagine, this is your current payment status. That means, it shows how many times accounts have become delinquent.  It also shows how many accounts are currently delinquent, as well as the overall trade balance. 

Frequency

This one shows how many times your accounts have gone to collections.  In addition, it notes the number of liens and judgments you have. Also, it shows any bankruptcies related to your business or personal accounts.

Frequency also incorporates information about your payment patterns. Were you regularly slow or late with payments? Did you decrease the number of late payments over time? That affects your score. 

Monetary

This specific factor focuses on how you make use of credit. For example, how much of your available credit are you using right now? Do you have a high ratio of late balances when compared with your credit limits?

Of course, if you are a new business owner, a lot of this information will not exist yet. Intelliscore Plus handles this by using a blended model to identify your score. This means your personal credit score becomes part of determining your business’s credit score.

Experian’s Blended Score

The blended score is a one-page report that provides a summary of the business and its owner.  A combined business-owner credit scoring model works better than a business or consumer only model.  In fact, blended scores have been found to outperform consumer or business scores alone by 10 – 20%.

Experian Financial Stability Risk Score (FSR)

FSR predicts the potential of a business going bankrupt or not paying its debts.  Consequently, this score identifies the highest risk businesses by using payment and public records. They look at a number of factors, some of which include: 

• high use of credit lines
• severely late payments 
• tax liens 
• judgments 
• collection accounts 
• risk industries 
• length of time in business 

Corporate Credit Report: The Equifax Service Credit Rating

Similarly, Equifax shows three different points on its corporate credit report. These include: 

Equifax Payment Index

Similar to PAYDEX, Equifax’s payment index is a measurement on a scale of 100. It shows how many of your small business’s payments were made on time. Like the others, it uses data from both creditors and vendors. However, it’s not meant to anticipate future behavior.  That is what the other two scores are for.

Equifax Credit Risk Score

This score shows the likelihood of your company becoming severely delinquent on payments. Scores range from 101 to 992 and include an evaluation of:

• Available credit limit on revolving credit accounts, including credit cards
• Company size
• Proof of any non-financial transactions (like merchant invoices) which are late or were charged off for two or more billing cycles
• Length of time since the opening of the earliest financial account

Equifax Business Failure Score

Equifax’s business failure score takes a look at the risk of your business shutting down. It runs from 1,000 to 1,600 and bases its scoring on these factors:

• Total balance to total current credit limit in the past three months
• The amount of time since the opening of the oldest financial account
• Your small business’s worst payment status on all trades in the last 24 months
• Proof of any non-financial transactions (like merchant invoices) which are late or are on a charge off for two or more billing cycles

For the credit risk and the business failure scores, a rating of 0 means bankruptcy.

Equifax Scores

A positive Equifax score for your business is as follows:

• Payment Index 0 to 10
• Credit Risk score 892 to 992
• Business Failure score 1400 to 1600

Are These the Only Agencies Where You Can Get a Corporate Credit Report? 

In short, no.  In fact, there are multiple other agencies that will issue a corporate credit report.  These, however, are known as the big three. They are the most commonly used. Still, there has been an increase in the use of another option recently.  It’s the FICO SBSS. 

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Corporate Credit Report: What is the FICO SBSS?

So, the FICO SBSS is the business variation of your personal FICO credit report. Unlike your personal FICO, the SBSS reports on a scale of 0 to 300. The higher the score the better. However, the majority of loan providers demand a rating of least 160.

Exactly how is the FICO SBSS Scored?

Surprisingly, it is significantly different from other business credit scoring designs. The SBSS utilizes your corporate credit score and individual credit rating. It also makes use of monetary details like business assets and income. As you can see, the goal is to give an overall financial picture rolled into one rating.

Business owners cannot access their FICO SBSS by themselves. There is a proprietary formula for score computations. FICO does not make that info public. The result is, you go into lending institutions blind as to what your FICO SBSS credit rating might be. 

Furthermore, lenders can choose how certain factors are weighted in the computation of your score.  This means your FICO SBSS could actually be different from one lender to the next. For example, one lender could put more weight on your business payment history, while another could lean more on your personal credit score. 

Corporate Credit Reports: What Can You Do?

Now that you know who issues them, how they are calculated, and what information lenders may see, you can begin to figure out how you can ensure your corporate credit report contains as must positive information as possible. The number one thing you can do is make your payments on time.  Regardless of what report they look at from which agency, the thing all lenders care about most is that you pay your bills.  

In addition, you can monitor your credit reports to ensure all information is complete and accurate.  If you see a mistake, contest it. Do so in writing, and be sure to send copies of any backup documentation.  If you see old information, get it updated. You don’t want old addresses or closed accounts causing problems.  Monitor your corporate credit for a fraction of what it costs with the reporting agencies directly here. 

In the end, the most important thing you can do for your corporate credit report is to make your payments consistently on-time.  The rest is important, but this is the number one thing lenders look for when it comes to making credit decisions.

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