Business Credit Scores: What They Are and How to Build One

Who issues business credit scores

Dun & Bradstreet, Experian and Equifax each keep business credit files. FICO also publishes a small business score used in some lending decisions.

Each bureau collects data from suppliers, lenders and public records, then applies its own model. Dun & Bradstreet is known for the Paydex score. Experian and Equifax each have their own business scoring products. Scales and names differ, so a number from one bureau does not translate to another.

Many small companies have a thin or empty file, simply because no one has reported their payments. That is normal, and it can be fixed. See our guides on the Paydex score and the FICO SBSS score for details on two of the most common.

What goes into the score

Payment history is the biggest driver. Other inputs include credit use, company age, size, industry and public records such as liens or judgments.

• Payment history. Whether you pay suppliers and lenders on time, early or late.
• Amounts owed. How much you owe compared to available credit.
• Company profile. Years in business, employee count, industry and location.
• Public records. Tax liens, judgments, bankruptcies and collections.
• Inquiries. Recent applications for credit.

Exact weightings are proprietary and change, so be wary of anyone who promises a precise formula.

Business score versus personal score

They are separate files. Small business lenders usually check both, and for newer or smaller companies the owner's personal credit often carries the most weight.

A young company has few trade lines, so lenders lean on the owner. Personal guarantees are common for exactly this reason. Even if you build strong business credit, expect your personal history to matter in underwriting for a long time.

At ROI Funder, we consider owners with a 500 or higher FICO. A business credit file is helpful but not required to apply. What carries the most weight on many files is your recent bank activity: monthly revenue, deposit consistency and time in business.

Steps to build business credit from scratch

Register the business properly, keep finances separate, open trade accounts that report, and pay on time or early. Then check your reports for errors.

1. Form the entity and get an EIN. Use the same legal name and address everywhere. See our guide on the business tax ID number.
2. Open a business bank account. Mixing personal and business funds weakens your file. Our bank account guide walks through it.
3. Get a business phone and address that match your registration, since mismatches create confusion in data matching.
4. Open vendor accounts that report. Net-30 accounts with suppliers who send payment data to the bureaus build history.
5. Pay early when you can. Early payment can help some scores, such as Paydex.
6. Check your reports and dispute errors.

How long it takes

A usable file can form within a few months of reported payments, but a strong history takes a year or more of steady activity.

Bureaus need data points. One reported account is thin. Three to five trade lines paid on time over several months starts to look like a pattern. There are no shortcuts that hold up, and services that promise to "fix" or "erase" a business credit history for a fee deserve skepticism.

While you build, financing is still possible. Cash-flow-based products such as working capital and revenue-based financing weigh revenue and bank history heavily, so a thin business credit file is not a dead end.

A realistic first-year plan

Months one to three set up the basics, months four to eight add reporting accounts, and months nine to twelve focus on keeping a clean record.

In the first quarter, get the legal pieces in place: entity, EIN, business bank account, consistent name and address. In months four through eight, open two or three vendor accounts that report, buy what you would buy anyway, and pay before the due date. Keep balances low relative to limits.

In months nine through twelve, review all your reports, dispute errors and consider adding one more reporting account if your file is still thin. By year end you should have a small but healthy file. That will not make you a prime borrower overnight. It does give you a track record to point to.

Along the way, do not wait for the file to be perfect before addressing financing needs. Revenue and bank history carry real weight with many funders, and a good decision today can earn the money that helps you build credit tomorrow.

Mistakes that damage a business file

Late supplier payments, maxed-out accounts, unresolved liens and inconsistent business details are the common causes.

Watch for these:

• Paying invoices 30 or more days late as routine practice.
• Using a personal card for business spending and never separating the two.
• Ignoring a tax lien, which can stay visible and make lenders cautious.
• Changing your business name, address or phone without updating records everywhere.
• Applying for many credit lines in a short window.

If your score is weak today, a plan matters more than a panic. Fix the bills, build clean history, and apply for financing when the numbers support it. When you are ready to see options, the ROI Funder application uses a soft pull, so checking has no effect on your credit score.