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Business Credit Scores

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Jeng Canicosa

on 24 July 2014

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Transcript of Business Credit Scores

Business Credit Scores
The business can use its
The business can also qualify for credit lines & loans
Business Credit Scores
D&B Reports
D&B’s Supplier Evaluation Risk Rating (SER)
Stephen Leifer

D&B Reports

Business Credit Scores
- are credit scores for a business and are in the business name
The business will then qualify for greater credit
The business builds its own
credit profile & credit score
With business credit...
With an established credit profile & score...
Business Credit
Business credit scores assess a business’s ability to pay,
not the business owner's
Since the business qualifies for the credit, in some cases there is
no personal credit check required from the business owner
credit scores to qualify for
revolving credit accounts with
Staples, Lowes, Sam’s Club, Costco, BP, WalMart, MasterCard, Visa, and AMEX

paydex score
A mathematical model that is

used to predict the chances
the next
12 months
on an account
Credit score
Credit Score
of going 90 days late within...
the next
24 months
on an account
Reflect the business's likelihood of defaulting on an obligation, not the business owner's
It is based on how the business obligations are being paid, not how the business owners pay their personal obligations
Is a credit identifier code provided by D&B
Dun & Bradstreet
Created in 1841
Known as D & B
It is the
business credit reporting agency
Holds the LARGEST supply of worldwide business information - with over 206 million records

Obtaining a DUNS number is the
first step towards getting a business credit score
with D&B
The business identifier code was developed in 1963 to support D&B's credit reporting practices
Digit number issued by D&B and assigned to each business location in the D&B database each having unique, separate, & distinct operational purpose
Each business must first have a DUNS number
before D&B will assign a
paydex business credit score
It is the preferred method worldwide
Unlike Employment Identification Number (EIN), a DUNS number may be issued to any business worldwide
Used in many foreign countries
US, Australia, European Commission, United Nations
More than 50 global industry & trade associations recognize, recommend, or require DUNS
D&B's score
paydex score
- main credit score used in the business world, provided by D&B
“The D&B PAYDEX® Score is D&B’s unique dollar-weighted numerical indicator of how a firm paid its bills over the past year, based on trade experiences reported to D&B by various vendors”

Paydex score
Ranges from 0-100, with 100 being the best score a business can obtain
A score of
is considered "
" or healthy credit
A business can obtain a good business Paydex credit score by ensuring payments are made promptly to suppliers and vendors
Personal Credit Scoring
Personal credit scores take time to build as they are based on
5 factors
Payment History


Length of Credit history
Accumulation of New Credit
Credit Mix
Business credit scores are based only on whether the business pays its' bills on time
Expect payment may come early 100
Payment comes within early discount period 90
Payment is prompt 80
Payment comes 14 days beyond terms 70
Payment comes 21 days beyond terms 60
Payment comes 30 days beyond terms 50
Payment comes 60 days beyond terms 40
Payment comes 90 days beyond terms 30
Payment comes 120 days beyond terms 20
Unavailable UN

D&B Paydex Score
A business will need a
PAYDEX score of 80
to obtain the
most favorable financing
This score simply reflects that the business pays all bills on time
To obtain a PAYDEX score, a business will need at least five trade accounts reporting to their file
It can take as long as
90 days
for those trades to report and a score to be established
The business credit score itself is calculated by using as many as 875 payments.

It is important for a business owner to have accounts report with favorable payment history
If bills are paid on time, the business credit score will be positive
But if payments are made late, the PAYDEX business credit score will drop
The PAYDEX score will adjust according to how early or late the bills are paid

Another important aspect of the Paydex system of which most business owners are not aware is a Paydex “
weighted average
” score

This score gives more weight to the trade accounts that report higher amounts of credit extended and less weight to trade accounts that are reporting lower dollar amounts of credit
a paydex tip
If a business owner is having any trouble “
meeting all their credit payback obligations
”, in other words if they know they are going to pay a bill late, it is important for that business to be sure to pay the “
largest dollar
” creditors first

This way, their reporting, which carries more weight in the business Paydex score, will remain positive.

Dun & Bradstreet further lists in their reports the details on payments the business has made for each individual account,
full payment record
upper-credit limit
how much they currently owe on each account
how much is past due
what the terms of the account are
when the account was reported and last updated

Extra information D&B provides includes detailed financial information
*current assets, liabilities, working capital,
net worth, sales, new profit and loss, and

D&B reports also list payment details for each account. They also add detailed commentary to the report indicating payment patterns

This rating predicts the likelihood that a company will file for bankruptcy and cease operations within the next 12 months
This score ranges from
with 1 being the lowest risk and 9 being the highest

D&B’s Supplier Stability Indicator (SSI)
This model predicts the likelihood that a supplier will encounter a large and significant financial or operational stress over the next 90 days
This score ranges from 0-10 with 0 being the lowest risk and 10 the highest

Stemmed from TRW which was founded in 1901
They provide business credit evaluations for over 27,000,000 small businesses and corporations worldwide
Experian’s headquarters are in Dublin, Ireland

Is the Experian's most recent score system
They boast of this as the next level credit scoring
This method was released in 2008
Intelliscore Plus takes into account hundreds of variables to offer a business score between 0-100, with 100 being the highest
Intelliscore Plus is advertised as a highly predictive score that provides a very detailed and accurate reflection of a business’s risk
Intelliscore actually predicts a business’s risk of going seriously delinquent, or over 91 days late, or having a major financial issue such as bankruptcy within the next 12 months

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

Intelliscore is already being widely used
Many of the largest financial institutions worldwide use it, along with over half of the top 25 P&C insurers and most major telecommunications and utility firms
Industry leaders in transportation, manufacturing, and technology have also been known to use Intelliscore as their primary risk indicating model

The new Intelliscore Plus has over 800 aggregates or factors that affect the credit scores
Scores are assessed on more than 7.2 million businesses in Experian’s database

Experian first takes a business and looks at data segments such as firmographics, public records, collections, and trade information, then places each business in one of three different models

Commercial model
for small,medium,
large business
Blended/owner model
the commercial data
is linked w/ owner's info
Intelliscore plus /
percentile score
Intelliscore breakdown
Intelliscore Plus, just like FICO, has multiple facets to the entire score makeup
The score is still based on the payment history of the business, but many other factors tie into percentages of the overall score.
The Historical Behavior or payment history accounts for 5-10% of the total score
Current payment status, trade balances, and percent of delinquent account for 50-60% of the score makeup

The business’s credit utilization affects 10-15% of the total score. This has to do with the amount of credit that has been extended to the business in relation to the balances they currently have on those accounts.
The company profile, age of business, industry risk, and size of business (assessed by number of employees) accounts for 5-10% of the total score
And 10-15% of the total score is determined based on the derogatory items, collections, liens, judgments, and bankruptcies that the business has

predictive data - use this data to better determine a business's lending risk
Average balances on accounts - how recent are the delinquencies, what number and what percent of accounts are current versus delinquent, the percent of balances seriously delinquent, the overall utilization ratio, and any balances on lease
Equifax's Credit Risk Score
90 & above
obligations are being paid as agreed
payments are being made 1-30 days overdue
payments being paid 31-60 days past the agreed-upon due date

payments being made 61-90 days overdue

obligations are being paid 91-120 days overdue

obligations are being paid 120+ days past the due date

Oldest & largest credit bureau in existence today
Originally found in 1898, 70 years before the creation of TransUnion
It was gathering details about: people, marital troubles, jobs, school, history childhood, sex life, political activates & more
In response, when the US Congress met in 1971 it enacted the
Fair Credit Reporting Act
Equifax's Credit Risk Score
By definition the score predicts the likelihood of a business incurring a 90-days severe delinquency or charge-off over the next 12 months

Equifax Business Failure Risk Score
Equifax also offers a Business Failure Risk Score with many reports
This Risk Score predicts the likelihood that the business will fail or file for bankruptcy within the next 12-month period
This model helps identify businesses that pose a greater risk for failure so that suppliers and credit grantors can take appropriate actions

Equifax's Credit Risk Score
Equifax’s main business credit scoring model is the Credit Risk Score
This score was created to predict the probability of a business customer becoming seriously delinquent on supplier accounts, or bankrupt, within a 12-month period
Credit scores range from 1-100, with a lower score indicating a higher risk of serious delinquency

When Experian is assigning a business a credit score they take many factors into account

Equifax’s Small Business Credit Risk Score for Suppliers
This model is designed to help credit grantors improve their risk assessment and reduce delinquency rates while helping to improve profitability
The score utilizes unique bank loans, lease information, credit card data, and supplier, Telco and utility credit history, public records and firmographic data from their own Equifax Commercial database
The Small Business Credit Risk Score for Suppliers credit scores range from 101-816


Intelliscore, and the Small Business Risk Score
are the most popular business credit scores

A positive score can be obtained in as little as 60-90 days with all three reporting agencies

Paying business bills as agreed will net a positive credit score at all three reporting agencies

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