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Experian maintains a database of more than 27 million businesses and reports on information like the company’s collection and payment history, bankruptcy filings and information about banking, insurance and leases.
Using this information, Experian assigns a business credit score using the Intelliscore Plus model. These scores range from 0 to 100, with scores 80 and over representing a lower risk.
Experian Business is an extremely valuable source for business credit because it receives the majority of its reporting from commercial banks, equipment leasing companies, revolving business credit card accounts, and many vendor lines of credit (Net 10, 15 & 30 accounts).
Experian won’t prepare a report and generate a business credit score unless it has a certain minimum amount of information on a business. This includes at least one tradeline, or credit account.
You can begin to establish it by opening an account with a company that reports to Experian.
How it’s calculated
Payment Status- 50%
The ratio of delinquent accounts to total accounts reporting on your business credit is one of the most important factors in determining your payment status and your business credit score. The fewer slow or late payment accounts as compared to total number of accounts, the better.
Derogatories – 15%
The amount of derogatory items and public records on your account constitutes approximately 15% of your credit score. Public records are an important source of business credit information. Liens, judgments, bankruptcies, UCC filings, and other derogatory items indicate that your company has had financial trouble in the past and will limit your ability to get financing and potentially even deter potential suppliers, vendors or partners from doing business with you.
Credit utilization- 15%
Credit utilization accounts for 10-15% of your business credit score. 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 all affect your score.
Payment Trends – 10%
Payment trends account for about 10% of your score; 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.
Your company information constitutes approximately 10% of your score. It indicates 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.
Think You May Have a File?
Experian Smart Business Reports allows you to see if your business has a credit file established with Experian Business. It also allows you to update your company details if there is inaccurate information listed.