Credit scores and indexes can be the difference between a company’s ability to fail or succeed.
Like consumer credit scores, business credit scores play a huge role in determining whether a business qualifies for financing or a partnership.
All three bureaus consider similar factors when generating a business credit score and while Dun & Bradstreet and Experian are the most popular credit bureaus, it is important to maintain an excellent profile amongst all three bureaus. Lenders and firms will vary in regards to which bureau they prefer, and some decision-makers use all three to determine a business’s creditworthiness. New credit indexes, pull information from all three bureaus and if a business has a sub-par profile with one bureau, it can affect the overall index score.
Dun & Bradstreet Paydex Score (1-100): The Paydex Score is a numeric scoring system ranging between 1 and 100, with the highest score indicating the lowest risk. Most businesses have a Paydex Score between 30 and an 80. A high Paydex Score indicates excellent payment history and other factors. Similar to Dun & Bradstreet’s Paydex Score, Experian’s Credit Ranking Scoreranges from 1-100 with the highest score equaling the lowest risk. Equifax, the least popular of the three bureaus, uses the Business Credit Risk Score which ranges from a 101-816, with a higher score indicating lowest risk.
Dun & Bradstreet’s Financial Stress Score(1-5): Dun & Bradstreet’s Financial Stress Score was designed to help decision-makers predict the likelihood that a business will require legal relief from creditors or cease operations without paying all creditors in full over the next 12 months. The Financial Stress Score uses the full range of Dun & Bradstreet’s information, including financials, comparative financial rations, payment trends, public filings, demographic data and more. The Financial Stress Score ranges from 1 to 5 with the lower number reflecting the lowest risk.
Dun & Bradstreet’s Delinquency Predictor (1-5):The Delinquency Predictor model is based upon the observed characteristics of hundreds of thousands of businesses in Dun & Bradstreet’s database and the relationship these characteristics have to the probability of a company experiencing severe delinquency over a period of 12 months. The Delinquency predictor is designed to predict the likelihood that a company will pay its bills in a severely delinquent manner (90 days or more past terms), obtain legal relief from creditors or cease operations without paying all creditors in full over the next 12 months, based on the information in Dun & Bradstreet’s database. The Delinquency Predictor ranges from 1 to 5 with the lowest score reflecting the lowest risk.
Dun & Bradstreet’s Viability Rating: The Viability Rating helps decision-makers quickly assess a firm’s size and composite credit appraisal, based on information in a company’s interim or fiscal balance sheet and an overall evaluation of the firm’s creditworthiness.
Dun & Bradstreet’s Supplier Evaluation Risk Rating(1-9): The Supplier Evaluation Risk Rating is used by decision-makers in the Supply Chain industry to measure the level of risk associated with a particular supplier or business. The Supplier Evaluation Risk Rating is used to determine if a supplier is more or less likely to cease business operations or become inactive over a 12 month period. The Supplier Evaluation Risk Rating considers statistics, probability and predictive data to assess a supplier’s likelihood of failure and provides vendors with the resources to compare suppliers on a global scale; this differs from the Dun and Bradstreet Financial Stress Score, which merely provides a supplier’s relative ranking in the United States. Because the Supplier Evaluation Risk Rating takes more into consideration, a business might have a Supplier Evaluation Risk Rating that changes more frequently than its Dun and BradstreetFinancial Stress Score. The Supplier Evaluation Risk Rating ranges from 1 to 9 with the lowest number reflecting the lowest level of risk.
Experian Credit Ranking Score (1 -100): The Credit Ranking Score ranges from 0 to 100, with the lowest score reflecting the highest risk. The score is based on a number of factors contained in a business credit report such as outstanding balances, payment habits, credit utilization, etc. The objective of the Credit Ranking Score is to predict payment behavior. High Risk means that there is a significant probability of delinquent payment. Low Risk means that there is a good probability of on-time payment.
Equifax Business Credit Risk Score (101-992):The Business Credit Risk Score is based on a combination of reported financial transactions, including banking, leases, trade accounts, public records, and business demographics. The Business Credit Risk Score ranges from 101-816 with the highest score indicating the lowest risk of delinquency and the lowest score indicating the highest risk of delinquency. Equifax provides explanations of why a particular business earned a score based on a series of reason codes provided in the report.
The Fico SBSS Score: The FICO® SBSS℠ Credit Score is used by lenders to assess the risk level associated with a business applying for a term loans and lines of credit up to 1 million dollars. The FICO® SBSS℠ Credit Score system is customizable and generates a score in half the time of other scoring modules. The FICO® SBSS℠ Credit Score categorizes small businesses by the likelihood that they will make timely payments. It ranges from 0-300 with the higher credit score reflecting the lower risk. The score is based on the principal(s) FICO® personal credit score, information compiled by business credit bureaus and other commercial data The FICO® SBSS℠Credit Score system allows lenders to accrue a personalized score based on their own priorities.
Franchise Finance Index: The Franchise Finance Index is composed of four quadrants: the average Fico Score, the average FICO SBSS Score, average liquid assets and average retirement savings. The statistics are derived using data from over 9,000 accounts in the bQual database (including Jamba Juice, Smoothie King and Firehouse Subs) to reflect the industry average. The January 2016 Franchise Finance Index revealed an average FICO Score of 748.15, an average Fico SBSS Score of 191.38, average liquid assets of $158,760 and average retirement savings of $188,649.