Much like your personal credit score monitors your bill payment activity, your business credit score rates your company’s track record for paying its bills in a timely and responsible manner. When considering working with your organization, suppliers and creditors use this numeric rating to gauge how likely you are to pay them back on time. And these third parties can check your report at any time, making it a highly accessible resource.

Due to the aforementioned factors, your business credit score can affect your ability to secure business loans and receive favorable payment terms from suppliers. Its potential impact on the ability of your company to grow, prosper and remain solvent is enormous.

Establishing and maintaining a good credit score begins with a clear understanding of what your report means. This will allow you to decipher weaknesses (for example, consistently paying bills late) and develop a plan for improving your performance going forward.

The Reporting Agencies

Three credit reporting agencies calculate your business credit score and provide details such as your payment history – Experian, Equifax and Dun & Bradstreet (D&B). Each agency focuses on different types of payment history, so it is important to obtain reports from all three.

D&B is primarily concerned with trade history and is heavily preferred by suppliers. Equifax and Experian, on the other hand, track both trade history and loan payment history. As a result, lending institutions such as banks tend to rely on these agencies.

Business reporting agencies calculate scores differently than consumer reporting agencies, sometimes assigning multiple scores. This is why you will not see a number that falls in the 300 to 850 range of personal credit scores.

Breaking It Down

When it comes to your business credit score, the first section you should review is the trade payment history. It displays a record of your payment history to vendors dating back three years. Look for the payment terms, most recent date each vendor sold goods or services to you, sale amount and when you rendered payment. When reviewing this last detail, pay particular attention to the timing of your payment relative to the payment terms.

The level of your payment responsibility in regard to business loans, insurance policies and equipment leases is covered in the commercial financial history section. Information that third parties will likely review includes how much credit you have received from lenders, the loan or policy terms, original balance and remaining balance and a record of payments.

Finally, the reporting agencies will assign your company a business credit score that represents their assessment of your potential future payment behavior. Since the scoring model varies from agency to agency, the numbers that define a good score are specific to each agency.

A solid credit score is the foundation of a successful business and the first step toward lasting financial health is finding out how the agencies have rated your organization. Taking this proactive step will place you on the road to success.