Top Credit Scoring Agencies: How They work

Introduction

Credit scoring agencies play a crucial role in determining the financial health of the business, as they provide business credit scores. The scores are evaluated by analyzing a variety of factors like payment history, credit utilization, credit history, and much more. This score helps businesses secure loans, negotiate favorable terms, and build robust relationships with suppliers and partners.

So, if you are wondering which agencies are these and how they work, keep reading. In this blog, we will discuss the top 5 business credit bureaus and explain how they work.

What Are Credit Scoring Companies?

Credit scoring companies are organizations that evaluate the creditworthiness of an individual or a business by providing a credit report along with a credit score. These companies gather information related to your financial history and current financial situation to generate a credit score.

Credit scoring companies play a critical role in the financial ecosystem by providing the tools and data needed to make informed credit and lending decisions. For businesses, accessing their credit reports provided by these agencies is crucial, as lenders use these scores to assess lending risk. Higher credit scores generally lead to better loan terms and lower interest rates.

5 Top Business Credit Scoring Companies

Different credit bureaus have different scoring ranges, different scoring models and different ways to assess the creditworthiness of the business. Experian, Equifax, D&B, CreditSafe and Ansoinisa are top five business credit rating agencies which provide business credit scores.

Here is brief about these top business credit bureaus:

1. Experian

   Widely renowned among both small-scale and large-scale businesses, Experian is a prominent credit scoring company that provides comprehensive credit reports for businesses. It is a multinational data analytics and consumer credit reporting agency headquartered in Dublin, Ireland.

   Experian offers business scoring models like Intelliscore Plus, which predict the likelihood of timely debt repayment and overall credit risk. The agency collects business credit data from various sources, including creditors, lenders, and public records. It provides business credit scores, ranging from 0 to 100, reflecting varying levels of risk: 0 signifies high risk, while 100 indicates low risk.

   Along with financial data, credit scores, and risk factors, the agency also provides additional services for businesses to protect against fraud, identity theft, and unauthorized transactions, including advanced analytics and decision-making tools.

2. Equifax

   Equifax is a global data, analytics, and technology company known primarily for its role as one of the major credit reporting agencies in the United States. The business credit reports provided by Equifax offer comprehensive insights into the credibility, financial robustness, and operational performance of a wide array of businesses.

   Like other credit scoring companies, Equifax considers businesses’ payment trends, credit history, and public records to evaluate the credit score.

   However, unlike other agencies, Equifax provides three different scores for businesses: the Payment Index, which ranges from 1 to 100; the Business Credit Risk Score, which ranges from 101 to 992; and the Business Failure Score, which ranges from 1,000 to 1,610.

3. Dun and Bradstreet (D&B)

   Dun & Bradstreet is one of the leading agencies that holds the largest volume of business-credit information. This vast repository enables D&B to provide nuanced assessments of creditworthiness, risk management solutions, and strategic insights crucial for businesses, lenders, and suppliers.

   The agency assigns a unique nine-digit D-U-N-S number to each business, which helps track and manage the company’s credit profile consistently across various platforms and reports.

   D&B evaluates the creditworthiness by using proprietary scoring models, such as the PAYDEX score. The score ranges from 1 to 100, with 100 being the highest and excellent rating.

4. CreditSafe

   CreditSafe is a global provider of business credit reports and risk management solutions. Compared to other reporting agencies, CreditSafe provides predictive credit scoring. It predicts 70% of insolvencies up to 12 months in advance. 

   Along with credit scores and limits in the business credit report, the agency also provides core business data and payment data. The comprehensive credit report helps creditors gain better insights into how the company functions and indicates how its future performance is going to be.

   The agency helps creditors and lenders evaluate the risk associated with the potential business with a credit score, a number between 0 and 100. To simplify decision-making, the agency uses a color-coded system for scores: green represents low risk, and red indicates high risk.

5. Ansonia

   Ansonia is a business credit reporting and risk management agency acquired by Equifax. It provides credit information and services similar to those offered by other business credit bureaus. The company operates by providing detailed information about companies’ creditworthiness, financial stability, and risk factors.

   The agency offers tailored reports that are easy to understand, allowing businesses to grasp the essential details about a company’s creditworthiness quickly.

   Ansonia’s credit risk score functions similarly to other systems, utilizing a scale from 0 to 100. Generally, a score of 70 or above suggests a low-risk borrower, while a score of 69 or below indicates a higher level of risk.

How Do Credit Scoring Companies Work?

Top business credit bureaus like Equifax, Experian, and D&B operate by compiling detailed financial information about your business from various sources, such as banks, lenders, and public records. This data includes loan repayments, outstanding debts, and any instances of defaults or bankruptcies.

Using advanced algorithms and statistical models, these companies analyze this data to generate credit scores—numeric summaries that evaluate an individual’s or business’s creditworthiness and likelihood of repaying debts on time.

Factors considered

Here are some of the common factors that these agencies consider to generate the credit scoring:

• Payment history (whether you pay bills on time).
• Credit utilization ratio (how much credit you use compared to your total available credit).
• Debt levels relative to credit limit.
• Length of credit history (how long you’ve had credit accounts).
• Types of credit used (credit cards, loans, mortgages).
• New credit accounts and recent inquiries.

Credit scoring range

The credit scoring range of different credit agencies differs. Each agency uses a different scoring model based on which they provide the corporate credit rating

For businesses

The credit scoring range for business credit scores across various scoring models is typically from 0 to 100. Higher scores indicate lower credit risk, while lower scores suggest higher risk.

For individuals

For individuals, the broad credit scoring range typically used by major credit scoring models such as FICO Score and VantageScore is from 300 to 850.

Ultimately, these scores help lenders assess the risk associated with extending credit, influencing decisions on loan approvals, interest rates, and credit limits.

Here, it is important to note that all the major credit bureaus, like Equifax and Experian, are regulated primarily by the Fair Credit Reporting Act (FCRA). The FCRA is enforced by the Federal Trade Commission (FTC), which oversees the accuracy, fairness, and privacy of consumer credit reports.

Moreover, businesses can get their credit reports from these agencies and verify whether the information in the report is accurate or not. In case, they find any inaccurate data or error, they can get it rectified by writing acredit dispute letter to the respective agency. Doing so is essential, as any discrepancy in the credit report can negatively affect the credit rating of the company, ultimately impacting the reputation of the business.

How Can Businesses Check Their Credit Scores?

Checking business credit scores is crucial for understanding the financial health of the company and managing risk effectively. It helps businesses improve their creditworthiness and make more strategic decisions.

Typically, credit reports from most of these agencies can be easily obtained directly through their websites or customer service channels. Many agencies also offer online platforms where you can create an account to access your credit report and score easily.

Additionally, different agencies offer different types of business credit check services, paid and free. For instance, D&B offers free credit insights and a paid service tier for monitoring scores. Similarly, Experian has different business credit report products, providing various services at different prices. Therefore, depending upon the requirement, you can choose whether to go for a free service or a paid one.

Conclusion

By understanding how credit scoring companies evaluate your financial behavior and leveraging their insights, you can make informed decisions that bolster your company’s creditworthiness. With top agencies like Experian, Equifax, Dun & Bradstreet, CreditSafe, and Ansonia offering various services, you have the resources to stay on top of your credit health.

FAQs

1)Who provides business credit scores?

Business credit scores are provided by major agencies like Experian, Equifax, and Dun & Bradstreet (D&B). They evaluate how well a business handles its financial commitments, like timely paying bills and managing debt. These scores help creditors assess the business’s creditworthiness.

2)What is an acceptable business credit score?

An acceptable business credit score typically varies by the creditor and industry but generally falls above 75 on a scale of 0 to 100. Higher scores indicate lower credit risk, increasing the chances of securing favorable c of favorable credit terms and financing options.

3)What is a good Dun and Bradstreet score?

A good Dun & Bradstreet (D&B) PAYDEX Score is typically 80 or above. This score reflects consistent and timely payment behavior, demonstrating reliability in meeting financial obligations and managing credit responsibly. Besides, the higher the score, the better it is for the business. 

4)What is the highest credit rating for a business?

The highest credit rating for a business varies among credit bureaus. For instance, for Experian, a score above 80 is generally considered excellent; for Equifax, a score above 90 is typically considered very good; and for D&B, a score of 80 and above is considered good.

5)What is the most accurate credit rating agency?

Determining the most accurate credit rating agency depends on the specific needs of the business and context. Each major credit bureau has strengths in data collection, scoring models, and industry-specific insights, making them reputable sources for business credit assessments.