Experian Business Scoring

 

Dun & Bradstreet is the primary company used to evaluate business credit and issue a credit score known as a Paydex score.

There are also other companies that provide similar credit evaluation services to businesses based on their independent databases. One of them is Experian's Business Credit Division who offers a credit score known as an Intelliscore.

Experian is one of the three major consumer credit rating bureaus, but also provides business credit evaluations for over 27,000,000 small businesses and corporations. Experian's model is designed for companies that provide goods and services to small businesses.

Some of the items listed on Experian's reports include Business credit scores and credit summary, Key facts about the business, Corporate registration and contact information, Summaries of collections and payments, Uniform Commercial Code filing information, Banking, insurance and leasing information, Bankruptcy filings, Judgment filings, and Tax lien filings.

The Experian Intelliscore ranges from from 0-100 with a lower score indicating a higher risk for serious delinquency.  The 0-100 is a percentile score that reflects the percentage of businesses that score higher or lower than the specific business being looked at. For example, if the business has a score of 20, this means that company scores better than 19% of other businesses.  That also means that 80% of other businesses score higher than that business.

Payment status on commercial accounts is treated much differently than personal accounts, and this accounts for about 50% of an Intelliscore. On the personal side, a consumer has 30 days after a payment is due before a late payment can be reported on their credit. But on the commercial side, a creditor can report a late payment the day after it's due.

Approximately 15% of  an Intelliscore is based on the amount of derogatory items and public records. Liens, judgments, bankruptcies, UCC filings and other derogatory items indicate that your company has had financial trouble in the past. Before letting a bill or credit obligation get to the courthouse, see if there is an alternative that might work. Reach out to the person or company that you owe money to and see if some sort of arrangement can be worked out. If you are dealing with a collection agency or other company, they may be willing to work out a settlement with you. It's almost always more efficient for them to work with you directly than through the courts.

Approximately another 15%  is based on Credit Utilization; specifically, the ratio of account balances to recent high credit balance, the ratio of delinquent balances to credit limits, and balances carried in relation to the rest of businesses in the same industry. Since many business credit accounts don’t have credit limits, this ratio is used as an indicator of how much financial stress a business might be experiencing. The assumption is that the closer a business gets to its highest historical debt amount, the more difficult it could be for that business to make its payments on time.

Approximately another 10% of the score is based on Payment Trends. They are also a part of the overall payment status factor that accounts for 50-60% of your score. If you are paying your bills increasingly late, your payment trend will show that your average DBT is increasing, and your score could take a hit. In contrast, paying your bills on time or early will lower your average DBT and improve your score. Slow or late payments trends, as well as total number of delinquent accounts are the most important factors to consider within the payment status category. Days Beyond Terms (DBT) indicates how many days beyond terms your bill payments are. In consumer credit, a bill is considered late when it is at least 30 days overdue. But in business credit, there is a wide variety of payment terms such as Net 30, Net 60, etc. So, for example, if a business is supposed to pay its bills within 60 days and the business pays on day 67, the DBT is 7. Your business credit will be negatively impacted the higher your DBT is.

Approximately the last 10% of your credit score is based on Company Information. This is related to your business’s industry type, and is especially important because certain industry types are automatically considered high risk. Make sure this information is correct so your business is not being categorized in the wrong industry. Additionally, information such as how long you have been in business, number of employees, business owners, and contact information is listed here. This information needs to be accurate and congruent with any application for financing. If a bank or other lender is told your business is in a certain industry but then checks your business credit and a different industry is listed, it may well result in a decline. Ensure your SIC and NAICS codes are correct

Expert Credit Consultants, LLC specializes in establishing business credit and funding using our exclusive Business Credit and Financing Suite as well as consumer credit restoration and optimization. www.ExpertCreditConsultants.com.