Business Credit Score

A business credit score is a numerical rating a commercial credit bureau assigns to a business, summarizing how likely it is to pay its obligations on time. It is built from a file the bureau maintains on that business rather than on any individual. The Small Business Administration describes the landscape plainly: to check business credit, an owner can "get a copy of your company's report from Experian, Equifax, Dun & Bradstreet, or other several smaller credit reporting services."

The plural in that sentence is the important part. Unlike consumer scoring, where the three nationwide bureaus feed models built on a common 300-to-850 convention, commercial bureaus each maintain their own file, use their own data sources and publish their own scale. "Business credit score" is therefore an umbrella over several unrelated products rather than the name of one number, and a lender's decision depends on which bureau and which model it uses.

What actually feeds the file. The main input is trade credit: the accounts a business holds with suppliers, vendors and service providers, and how promptly it pays them. Some of those relationships get reported to commercial bureaus and some do not, which is why two businesses of identical size and payment behavior can have very different files. Business loans and business credit cards may report as well. The Small Business Administration points owners to a Dun & Bradstreet number, a DUNS number, described as "a unique nine-digit identification number for each physical location of your business," as a first step in establishing a file at all.

The legal boundary, which is the most useful thing on this page. The Fair Credit Reporting Act is a consumer statute and says so in its definitions: 15 U.S.C. 1681a(c) provides that "the term 'consumer' means an individual," and 1681a(d)(1) defines a "consumer report" as information bearing on a consumer's credit worthiness used for credit "primarily for personal, family, or household purposes," for employment purposes, or for another purpose authorized in the Act. A report on a business does not fit. The practical consequences are three, and each of them surprises owners who assume their consumer rights carry over:

• There is no business equivalent of the free annual consumer report. A business generally buys its own file from each bureau.
• There is no statutory dispute-and-reinvestigation right of the kind 15 U.S.C. 1681i gives a consumer. Each bureau runs its own correction process on its own terms.
• The accuracy and disclosure duties the Act imposes on consumer reporting agencies do not attach.

The Equal Credit Opportunity Act does reach business credit, and this is the right that survives. Regulation B, 12 CFR 1002.9(a)(3), applies the adverse-action notice rules to business credit with a split at a revenue line. "With regard to a business that had gross revenues of $1 million or less in its preceding fiscal year (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit)," the creditor must comply with the general notification requirements, with three relaxations: the statement of action taken may be given orally or in writing, the disclosure of the right to a statement of reasons may be given at the time of application rather than at denial, and a telephone application may be handled orally. For a business above $1 million in gross revenues, or for trade credit and factoring, 12 CFR 1002.9(a)(3)(ii) is thinner but not empty: the creditor must notify the applicant of the action taken within a reasonable time, orally or in writing, and must provide a written statement of reasons if the applicant makes a written request for them within 60 days. So a business turned down for credit can ask why and is entitled to an answer on either side of the revenue line, though the mechanics differ from the consumer version and, above the line, the answer has to be asked for in writing.

The personal score usually still decides it. The SBA is direct about this: "loan eligibility for a new business is typically based on its owner's personal credit score." When a lender pulls the owner's personal credit for a business loan application, it does so under the Fair Credit Reporting Act's permissible-purpose provision at 15 U.S.C. 1681b(a)(3)(F)(i), a "legitimate business need for the information ... in connection with a business transaction that is initiated by the consumer." That is the mechanism by which a personal consumer report legitimately reaches a business credit decision, and it is why an owner separating their business finances still cannot separate their personal credit from the outcome. The personal guarantee that accompanies most small-business credit cards and loans is the other half of the same point.

What follows for an owner. Because the file is built from what third parties choose to report, building business credit is largely a matter of having reportable relationships and paying them early rather than merely on time, then checking each bureau's file periodically for errors that no statute obliges anyone to fix. Because each bureau's model is proprietary, there is no published formula to optimize against, and any specific target number an owner is given should be traced back to the lender or bureau that set it.

1. The business becomes identifiable. A commercial bureau needs to know the entity exists. Registering for a DUNS number is the conventional first step for one of the bureaus, and other bureaus build files from public records and reported accounts.
2. Trade lines accumulate. Suppliers, lenders and service providers report payment behavior. Not all of them report, and a business can ask which of its vendors do.
3. Each bureau scores its own file. The models are proprietary and the scales differ, so a business has several scores at once and they will not agree.
4. A lender or supplier pulls one of them, often alongside the owner's personal credit report, and prices or declines the credit.
5. If declined, Regulation B's adverse-action rules apply, with the content and timing depending on whether the business had gross revenues over $1 million in its preceding fiscal year.

A hypothetical shows where the two systems diverge. Priya's catering company is two years old. It pays three suppliers on 30-day terms, all early, but only one of the three reports to a commercial bureau, so two bureaus hold almost no file on the business. She applies for a $40,000 equipment loan. The lender pulls a commercial report, sees a thin file, and pulls her personal credit under the permissible purpose in 15 U.S.C. 1681b(a)(3)(F)(i) because she initiated the transaction. Her personal score carries the decision. If the lender declines, and the company's gross revenues were under $1 million last year, 12 CFR 1002.9(a)(3)(i) entitles her to a statement of the specific reasons, which she may have to request. If it declines on the basis of her personal consumer report, the separate Fair Credit Reporting Act adverse-action notice rules attach to that report, because that report is about a consumer.

What a business credit file is good for

• It gives a business its own credit identity, so that over time financing and supplier terms can rest on the business's record rather than the owner's.
• Trade references reported by suppliers are the cheapest way to build one, and they cost nothing beyond paying on time.
• Suppliers and insurers often check it, so it affects terms well beyond borrowing.
• Separating business and personal credit limits how far a business setback reaches into the owner's own file, once the business can borrow on its own.

Where it falls short

• The Fair Credit Reporting Act does not apply, so there is no free annual report, no statutory dispute right, and no federal accuracy duty behind the file.
• Reporting is voluntary for suppliers, so a business with a perfect payment record can have a thin or empty file through no fault of its own.
• The models are proprietary and the scales differ between bureaus, so there is no single number to manage and no published formula to manage it against.
• For a young or small business the owner's personal score usually decides the outcome anyway, and a personal guarantee puts the owner's assets behind the debt regardless of what the business file says.