Business Credit is driven by your EIN or Tax ID number. Just like you have personal credit on your social security number, essentially your business EIN or Tax ID number is your businesses social security number. Establishing and building a strong business credit history can open the door for bigger and better business loans, lines of credit and credit cards. Here's a list of more reasons why you should build business credit. 

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The first step in establishing business credit is making sure your business is Credible in the eyes of the banks, lenders, and the business credit bureaus. There are a minimum of 10 items or data points that must be in place so that your business is “Credible”.  

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There are 4 tiers of building your business credit and Tier 1 is the most important. Think of this as 4 pillars to a strong foundation of your business. This includes properly setting up the first pillar of your company so that your business is considered Credible in the eyes of banks, lenders, and the business credit bureaus. If you do not set this up properly the other pillars will not matter and can result to lower approvals, delays, and lower Credibility.

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Tier 1 - Getting Started

 

Once your business is Credible, you can then move on to earning a “D&B Paydex” score, an "EX Intelli" score, and a EQ "Risk" score. To earn a Paydex score you will need 3-5 business credit accounts to report to D&B. At this point, Round 1 or Tier 1 is completed and your business is in a position with a legitimate business credit profile. You can qualify for government grants and business funding and you are ready to move on to the next tier.

 

Dun & Bradstreet® PAYDEX® Score

 

A Paydex score is a score that is created by Dun & Bradstreet® once you establish a business credit profile on their platform. The first thing you have to do is establish a "credible" business, set up a free Duns number, and then you'll need 3 to 5 starter business credit reporting accounts that will report to D&B. Once you have 3 to 5 accounts reporting, you will then be issued a Paydex score. Getting a high Paydex score requires strategic payment timing. Your score is from 0 to 100. Less than 80 i not preferable. 80-90 is good, 90+ is excellent.

 

Experian® Intelliscore Plus℠ v2 and Financial Stability Risk rating

 

Experian's business credit scores provide a quick view of a company's risk potential based on a scale of 1 to 100. The higher the score, the lower the risk. The objective of the Experian Business Credit Score (Intelliscore PlusSM) is to predict seriously derogatory payment behavior.

 

Equifax® Business Credit Risk Score™

 

Equifax's business credit scores predicts the likelihood of a business incurring greater than 90 days severe delinquency or charge-off on financial services accounts within a 12-month period. This score is built using financial services and trade payment data, providing a higher degree of predictability. The score range is from 101 - 992 and it returns up to four reason codes. 

PayNet® Business Credit Risk Score™

 

PayNet® is an Equifax® company that many commercial lenders and most equipment / vehicle lease and lending companies use. 

 

LexisNexis® Small Business Credit Report

 

LexisNexis® Small Business Credit Report combines credit data from the Small Business Financial Exchange, Inc. (SBFE) with Alternative Data from LexisNexis® to create a more inclusive snapshot of a small business and help your business extend more offers, optimize terms and avoid risk. 

 

SBFE® Small Business Financial Exchange™

 

The Small Business Financial Exchange™ is a highly trusted business data exchange that is governed by the small business lending industry and managed independently from credit reporting agencies. Small business lenders rely on SBFE’s distinctive information security and data governance controls. 

 

FICO®  Small Business Scoring Service℠ (SBSS℠)

 

FICO® Small Business Scoring Service℠ (SBSS℠) is recognized as the industry leader in assessing the risk of US small business credit applicants. SBSS is delivered via our FICO® LiquidCredit® Service infrastructure and brings the speed of consumer lending to your small business lending decisions. This is the model used by SBA Banks and Lenders to determine if an existing business with 2 years or more experience is credit worthy to be approved for and SBA 7(a), 504, Express, or Micro Loan.

 

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Tier 2 - Keep Building

 

In Tier 2 you will begin to now have access to more powerful accounts with larger limits. You will be able to access a mixture of Net 30 accounts, Revolving Credit Lines, Retail accounts, and Fleet accounts. 

 

You are now building your business credit and momentum is on your side. By the end of this round and based on the accounts you set up in Tier 1 you should have at least 7-8 accounts. Reporting on your business credit profile.

You should have an 80 or higher Paydex score. Your business should be easy to find in public records, all of your data points are intact and match across all platforms.

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Tiers 3 & 4 - Compound Credit

 

Tiers 3-4 are going to be more of the same from Tier 2, just with access to even bigger and better account options, collectively giving you access up to $100,000 plus of credit. Once you have completed Tier 4 you should have a minimum of 14+ accounts reporting on your business credit profile. Your business credit now has the depth and history it needs to help you qualify for equipment loans and leases, vehicle loans and leases, business loans including SBA 7(a), and business lines of credit.