Business credit scores | In-depth explanation
A business credit score is one of the most important numbers for any company, big or small. It determines how others banks, suppliers, landlords view your financial responsibility. In this guide, you’ll learn what business credit scores are, how they work and how to build one with real-life examples along the way.
What Is a Business Credit Score?
A business credit score is a number that shows how well your business handles its financial obligations. Just like a person has a personal credit score, a business has a score that tells others whether it’s likely to pay its debts on time.
Example:
Sarah owns a graphic design agency called “PixelBloom.” She applies for a business loan to buy new equipment. The bank checks her business credit score to decide if she’s reliable. A good score could get her a $25,000 loan at 7% interest. A low score might mean no loan or 18% interest instead.
Who Provides Business Credit Scores?
There are several credit bureaus that track and calculate scores. Each one uses different formulas and scoring systems.
| Credit Bureau | Score Range | What It Measures | Example |
|---|---|---|---|
| Dun & Bradstreet (D&B) | 0–100 (PAYDEX) | Timeliness of payments | A PAYDEX score of 85 means your business pays bills early. |
| Experian Business | 1–100 | Credit utilization, payment trends, public records | A score of 90 means low risk of default. |
| Equifax Business | Varies | Payment history, risk of failure, public records | A low score might reflect late taxes or liens. |
| FICO SBSS | 0–300 | Used by the SBA for loan approvals | A score of 160+ is often required for SBA loans. |
Why business credit scores matter
1. Helps Secure Loans and Credit
Lenders use your score to assess risk.
Example: “Healthy Harvest,” a small food brand, applies for a $50,000 working capital loan. With a D&B PAYDEX score of 90, they are approved quickly and offered favorable interest rates.
2. Determines Vendor Payment Terms
Vendors may allow you to “buy now, pay later” (Net-30 or Net-60) if you have a solid score.
Example: “Craft Co.” wants to order $5,000 worth of materials from a supplier. Because of their score, the supplier lets them pay the invoice 30 days later, instead of requiring payment upfront.
3. Improves business Insurance rates
Insurers see financially stable businesses as lower risk.
Example: A commercial landlord checks “GreenFix Landscaping’s” business credit before offering a lease. Their good credit score gets them a lower security deposit and reduced liability insurance premiums.
What affects your business credit score?
| Factor | What It Means | Example |
|---|---|---|
| Payment History | Paying bills on time or early | Paying a supplier 10 days before due date helps your PAYDEX score. |
| Credit Utilization | How much of your credit limit you’re using | Using $2,000 of a $10,000 credit limit = 20% usage (good). |
| Business Age | Older businesses often score higher | A 5-year-old business usually scores better than a brand-new one. |
| Public Records | Bankruptcies, tax liens, judgments | A tax lien for unpaid payroll taxes will hurt your score. |
| Number of Tradelines | More trade accounts = more data | Having 5–10 active vendor accounts helps build credit faster. |
How to check your business credit score
Tools You Can Use:
- Nav.com (free overview)
- Dun & Bradstreet: Register for a D-U-N-S Number to begin tracking your PAYDEX score
- Experian Business and Equifax: Paid and free reports available
Example: “Urban Essentials” signs up for Nav.com to monitor their Experian Business and D&B scores for free. They catch a billing error early and dispute it before it hurts their score.
How to build business Credit: Step-by-Step with Examples
1. Set Up Your Business Properly
- Form an LLC or Corporation
- Get an EIN (Employer ID Number)
- Open a business bank account
Example: “MiraTech Solutions” becomes an LLC and gets an EIN from the IRS. Now it can open a business checking account and apply for credit separately from the owner’s personal profile.
2. Open Vendor Accounts That Report to Credit Bureaus
Some vendors help you build credit even on small orders.
Starter Vendors to Consider:
- Uline
- Quill
- Grainger
- Crown Office Supplies
Example: “ClearPath Tutoring” orders $100 worth of supplies from Uline on Net-30 terms and pays early. That positive payment is reported to Dun & Bradstreet.
3. Get a Business Credit Card
Make small purchases and pay off the full balance monthly.
Example: “GlowBakery” gets a Capital One Spark business credit card, uses it for ingredient purchases and pays it in full every month. Within 6 months, their credit profile is strong enough for a $15,000 line of credit.
4. Pay On Time or Early
This is the single most important factor.
Example: “Pet Paw-sitive Grooming” always pays vendors a week before the invoice is due. This earns them a D&B PAYDEX score of 85.
5. Monitor Your Scores
Check your reports at least once a quarter.
Example: “Metro Movers” sees a score drop on Nav. They find a vendor reported a missed payment by mistake. They dispute it and get their score corrected.
What hurts a business credit score?
- Late or missed payments
- Using over 50% of available credit
- Frequent credit inquiries
- Tax liens or judgments
- Inconsistent business identity (e.g., different addresses on file)
Example: “Nova Techwear” changes offices but forgets to update their business address with D&B and the IRS. This causes a mismatch that delays their credit approval with a supplier.
Business Credit vs. Personal Credit: A Side-by-Side Look
| Feature | Business Credit | Personal Credit |
|---|---|---|
| Score Range | 0–100 (PAYDEX), or 0–300 (FICO SBSS) | 300–850 |
| Privacy | Public | Private |
| Use Cases | Loans, supplier credit, leases | Credit cards, mortgages, car loans |
| Affects Each Other? | Sometimes (if you sign a personal guarantee) | Yes, if business credit is poor and personal guarantee is needed |
Example: A sole proprietor uses personal credit for a business loan. If they default, their personal credit score takes a hit. Separating business credit helps avoid this.
⏳ How Long Does It Take to Build a Business Credit Score?
- 30–60 days: Vendors begin reporting
- 6 months: Establishing a good PAYDEX score (80+)
- 12+ months: Strong multi-bureau profile
Example: “Studio Bloom” opened trade accounts with three vendors in January. By June, they had a D&B PAYDEX score of 82 and qualified for a $20,000 equipment loan.
Quick tips to boost your business credit
- Always pay early or on time
- Work with vendors who report to bureaus
- Keep credit balances low
- Avoid legal trouble or public records
- Review reports regularly for accuracy
- Keep your business info consistent across platforms
Building business credit is one of the most valuable assets for any entrepreneur. It opens doors to funding, strengthens partnerships and gives you the freedom to grow without always relying on personal credit.
Author: Moureen Koech
Moureen Koech is a passionate Digital Journalist, an adept Agribusiness Writer with a keen eye for news and an impactful story-teller,whose stories provide key value to Agripreneurs and stakeholders in the Agricultural sector
