Most of us are readily familiar with the general structure of consumer credit, but if you’re a small business owner, becoming familiar with business credit is important to your overall success. Establishing and maintaining business credit will help you build valuable relationships with vendors, suppliers, manufacturers, and financial institutions that are important to operation.
For business owners, a good business credit score translates into lower interest rates, better trade credit, and access to the financial support necessary to grow and maintain your business. (Get the big picture of your business credit health with Nav Prime.) Still, the question remains: What is a good business credit score?
Identifying a Good Business Credit Score
There are a few ways to look at this answer, but let’s deal with the “numbers” first. Unlike consumer credit, which largely revolves around a fairly standardized credit ranking system, business credit scores tend to vary based on the reporting company or bureau.
While scales may vary, many popular credit reporting companies, like Experian’s Intelliscore Plus and D&B’s PAYDEX® Score, use scoring algorithms that rank scores from 1 to 100. Ranking systems like these typically associate a higher score with good business credit. For example, a D&B PAYDEX Score of 80 or higher would mean you make on time or early payments.
Other companies — like Equifax’s Small Business Credit Risk Score for Financial Services — use a rating system that ranks scores from 101 to 992.
The takeaway? To find out the exact scores needed for good business credit, it’s important to familiarize yourself with the reporting entities that valuable vendors, suppliers, manufacturers, and lenders use.
Here’s what the business credit scoring system looks like for Experian and D&B, as well as FICO SBSS.
Intelliscore Plus from Experian
| Score Range | Risk Class | Risk Description |
|---|---|---|
| 76 – 100 | 1 | Low |
| 51 – 75 | 2 | Low – Medium |
| 26 – 50 | 3 | Medium |
| 11 – 25 | 4 | High – Medium |
| 1 – 10 | 5 | High |
D&B PAYDEX
| D&B PAYDEX Range: | Rating: | D&B PAYDEX Risk Interpretation: |
|---|---|---|
| 80 – 100 | Good | A score of 100 means your payments come 30 days soon than your terms specify. 80 indicates on time payments. |
| 50 – 79 | Fair | A 70 indicates that you are paying 15 days late. A score of 50 indicates you are 30 days late. |
| 0 – 49 | Bad | 40 or less means your payments are coming 60 days or more past the due date. |
FICO SBSS
FICO SBSS scores range from 0 to 300. Like the other business credit indexes, the higher the score the better. If you are seeking financing, the magic FICO SBSS number to remember is 140. If you have a FICO SBSS score of 140 or above, you can pre-qualify for an SBA 7(a) loan. Most banks have a higher standard and will only pre-qualify you with a score of 160 or above.
Achieving and Maintaining Good Credit
Similar to the way rating scales vary from company to company, evaluative methods can also vary depending on the firm or bureau that is reviewing your credit profile. Essentially, the impact of different types of activities (late payments, available credit, credit utilization, etc) can change from company to company. For that reason, it’s also important to research the logic that goes into a company’s credit score rating structure.
However, there is good news! While there may be different methods of evaluation, there are still some simple guidelines that can help you reap the benefits of good business credit.
- Pay on time — or early — every time. Your credit score is used to evaluate the lending and credit risks associated with your company. With that in mind, it’s not surprising that one of the best things you can do to ensure a good credit score is to show that you can manage your debts and finances efficiently.Paying bills on time is a huge part of this, and therefore, it’s one thing you should strive to do on a regular basis. In fact, to achieve the maximum D&B PAYDEX Score, you will need to pay your bills 30 days ahead of schedule! Late payments and defaults can wreak havoc on your report and are a sure way to quickly turn good business credit bad.
- Utilize credit. While it’s never good to have an overwhelming amount of debt, utilizing some of the credit allotted to you can actually benefit your overall credit score. Quite simply, if you can take out a loan and make regular, timely payments, the perceived risk associated with your company will decrease. Ultimately, responsibly engaging in credit utilization will help you earn or maintain a good credit score over time.The key to this approach is to make sure that you are never over-extended and that you are fully capable of making the necessary payments for the duration of your loan or trade agreement.
- Maintain valuable lines of trade credit. In terms of overall importance, trade credit is high ranking. Trade credit, or credit extended to your company by vendors and suppliers, is often the lifeline of a business. How you manage this essential financing tool will directly impact your credit. Building successful partnerships with these vendors and suppliers (and paying on time) will help you get the products, goods, and services you need while improving the likelihood of maintaining a good credit score.
- Maintain your personal finances. Personal credit and business credit don’t always mingle, but in some cases, especially if you are a small business owner, your personal credit will be called into question. In fact, your FICO SBSS score will be heavily influenced by your personal credit — with pristine personal credit, you can close in on the 140 SBA pre-approval mark.This means it’s important that you maintain a good personal credit score if you’d like to keep or reach a good business credit score.
It’s easy to see a good credit score as a simple numerical range by which your company is judged. However, to really understand good business credit, it’s important to view the score as an mixture of short- and long-term practices that prove your company can handle and pay back debts. By regularly participating in the activities required to maintain good credit, you can open doors to essential financial opportunities.
How Nav Prime Can Help
Building business credit shouldn’t be hard, and it shouldn’t require you to pay for things you don’t need. That’s why your Nav Prime bundle gives you up to two actively reporting tradelines sent to all major business credit bureaus. Plus, you’ll be able to monitor your credit scores and reports from major business credit bureaus. Join the Nav Prime community today to start building your credit history today.
This article was originally written on December 14, 2015 and updated on November 20, 2024.
Hi , my business experian shows an A on my Nav report but before I canceled my subscription I had a 30 score. Not understanding why it’s showing an A after I canceled….Confusing
Eric – If you have questions about information on Nav feel free to reach out to customer support.
Hi, Do you have a list of what each letter score means? Example AA, A , B , C , D and so on.
The letter grades in your free Nav account do not correspond directly to credit score ranges. One way to think about it is this: if your grade is less than an A there are probably ways to improve. Many business owners have few accounts appearing on their business credit reports. When that’s the case, adding additional references that report – and paying on time – will often be helpful.
I see you’ve been consistently answering questions for quite some time. Appreciate you answering all these questions so many people have.
My pleasure!
Capital One has got me in there for 9 months Miss payment when that card was paid off and when I was in the green and they have hit me for 9 months for a credit card payment that there’s no credit card payment because I paid it all and I cut the card up I told them that
If this information is on your personal credit reports you have the right under federal law to dispute it with the credit bureau reporting the mistake.
What does an A credit score mean? I went from B to A.
If your score is in the A range then you are doing great on your business credit!
What numbers is in the A range ? And how do I get my Fico score on the app
The way to look at the grades is if your score is in the A range, most lenders should view your score as low risk. If it’s lower you may want to try to build stronger credit. The FICO SBSS score is available with a Business Loan Builder account. If you have that account and cannot find it, feel free to reach out to Nav’s customer support team.
This is a helpful article. I’m a business broker helping businesses everyday. Most owners owe no debt but a buyer will purchase a company and its assets and after closing need credit to fund working capital. A bank will search for open UCC’s prior to closing. Buying a company with a weak financial history is a red flag. Do your due diligence.
Great info. Definitely appreciate the help.
What a powerful article! Knowing what constitutes a good business rating is essential in today’s world of technology when facts are available in the palm of our hands and the competition so fierce and money is still so tight. Didn’t know how important personal finances counted in the business rating also. There’s a lot of planning to keep a business in good stead.
Hi Cynthia, glad our article could help! Yes, business credit is a very important part of maintaining a financially healthy business. Your personal credit can also affect your Experian Intelliscore business credit score. You can learn more about the Experian Intelliscore here: https://www.nav.com/business-credit-scores/experian-business-credit-score/
My personal credit is not good at all, I’m working on it! But isn’t the whole point for entities is to separate business from personal? I actually have a C Corp! I will always keep the two separate that protects me! Am I wrong?
Brittani,
Great question! At Nav we believe it’s essential for business owners to build both strong personal and strong business credit. Many lenders will check personal credit of the owners, especially in the first few years when the business is young or until the business reaches certain milestones in terms of revenue.
Yes, the goal is to completely separate business and personal credit over time, but it doesn’t happen overnight unfortunately.
What means B for business credit score?
It means you’re on the right track but with some tweaking you can likely get a higher business credit score. Don’t hesitate to reach out to Nav’s credit & lending team if you’d like a few pointers.