According to Dun & Bradstreet, the major business credit reporting and rating agency, a business credit score of 80 is considered a good credit score for businesses.
The Business & Personal Credit System
It is a well-known fact that personal credit scores range from 300 to 850, and the higher the score, the better a consumer’s chances of getting a personal loan, credit card, or another type of credit. A person with no credit or bad credit suffers a distinct disadvantage when buying a home, automobile, or other necessities of modern life.
Business credit, also known as trade credit, is a very similar system that replaces a person’s name, address, and Social Security number with the business’s name, address, and Employer Identification Number. However, business credit scores range on a scale of 0 to 100, and these scores are based almost entirely on a company’s ability to pay its bills and invoices on time.
What A Business Credit Score Means
For the most part, a business credit score relies almost entirely on a company’s ability to pay its debts to other businesses in a timely manner. It is a common practice in the business world for companies to extend their products and services to other businesses to be paid within 30 or 60 days from the time it is received. These companies then report how long it takes to receive payment on their invoices to one or more of the following business credit reporting bureaus:
- Dun & Bradstreet
- Equifax Business
- Experian Business
- Business Credit USA
Though many factors may play some small role in a business’s credit score, the rule of thumb for credit rating is the length of time a company takes to make good on its invoices:
- 20 or Lower – A score of 20 or lower means that a business is paying for products and services lent to them in good faith 120 days or more late.
- 50 – A credit rating of around 50 generally means that invoices are paid 30 days or so late.
- 70 – A score of about 70 signifies that the company pays its invoices about 15 days late.
- 80 to 100 – 80 and above means that the business has a good payment history, and pays its invoices on time or earlier than expected.
Generally, it takes a credit rating above 80 for other businesses to consider a company a risk worth taking.
Building Business Credit
Businesses are under no obligation to extend the professional courtesy of goods and services on credit. Likewise, they are also under no obligation to report timely or delinquent payments to any of the major business credit reporting agencies. This can make establishing and raising a company’s business credit rating difficult, but there are a few ways to raise this score by other means.
One way to help raise a business credit score is to contact Dun & Bradstreet and apply for a Data Universal Numbering System (DUNS) number – a unique 9-digit identification number that the credit bureau uses to track individual companies efficiently. The application is normally very easy and can be issued in only a couple of days.
Another, very effective way of raising a business credit score is by working with credit experts, like Credit Absolute, to improve your business credit ratings.
