You are likely aware of the personal credit score as a measure of a person’s ability to repay a loan. Correspondingly, the business credit score is a measure of a company’s credit health, hence their capability to repay loans. When a company needs to borrow money, a creditor will assess the condition of the company’s credit status before issuing terms and one of the effective ways to do this is to review their customer’s business credit score range.
- The business credit score is derived from the business’ credit profile in the marketplace.
- Commercial credit reporting bureaus assess a business’ creditworthiness using sophisticated scoring models.
- Creditors look at credit scores to evaluate a business’ likelihood of paying its invoices on time.
- Credit scores summarise more detailed credit information available in a business credit report.
What is a business credit score?A business credit score is a number (or numbers) that signifies the business’ creditworthiness. A business credit score range is based on data from its commercial credit file, which contains financial information. This number tells creditors how likely a company will pay its invoices on time. A business credit score is a numeric indicator amalgamated from detailed information available in the business credit report.
Why do I need to know a business’ credit score?Suppose you offer your customers trade credit as part of your payment terms. In that case, you’ll want to know upfront their credit health, i.e. the probability that your customer will repay you on time. A business credit score provided by a credit bureau will give you a credit evaluation based on combined market data. It is common for most suppliers to solely seek trade references (i.e. testimonials from other suppliers about the buyer’s payment behavior) as credit assessment information. However, the risk with relying on trade references is that you’ll only get a snapshot of healthy relationships. But what about the bigger picture? The business credit score takes out the personal bias and presents you with data-driven analysis. Get business credit scores with ezyCollect
What does the business credit score mean?There can be many interpretations of a business credit score as different credit reporting bureaus present the business credit score range in different ways. At ezyCollect, we offer the data from the top credit reporting bureau, illion. illion’s credit scoring model provides two credit scores: a late payment risk score and a failure risk score. By providing these data, you get a clearer picture of the business risks from your customers. illion’s late payment risk score predicts the likelihood of a company paying severely late (90+ days beyond terms in the next 12 months. The business credit score range is 101- 799, where 101 represents the highest risk and 799 represents the lowest risk of delinquent payment. Illion’s failure risk score predicts the likelihood that a business will seek legal relief from its creditors or cease operations leaving unpaid debts in the next 12 months. The business credit score range is 1001-1999, where 1001 represents the highest risk and 1999 represents the lowest risk of delinquent payment.
What influences the business credit score?The data used in the statistical analysis of business credit scores are mined from the credit bureau’s commercial database. Every bureau has its own credit score algorithm to calculate a credit score. Key influencing factors in the illion business credit scores predicting late payment risk and business failure risk include:
- Trade payment information (e.g. records of payments with vendors)
- Collections data (e.g. debt collection notices against a company)
- Company demographic information (e.g. industry type)
- Director information (e.g. address and date of birth)
- Public record information (e.g. court records, business status records)