How your Experian and Equifax credit scores affect your business there are
three major companies that collect business information and published it. Dun
and Bradstreet is the biggest with over 210 million records on file.
Experian is the second biggest with over 27 million records on file.
Equifax is the smallest business CRA or Credit Reporting Agency, Experian focuses
on providing quality data and analytics to businesses to help them better assess
risk, they possess a massive consumer and commercial database that they manage to
help businesses to obtain the best and the most up to date information they did extract
significant extra value with this data by applying their own proprietary
analytics and software Experian uses both consumer and business credit
information to gauge risk from Experian by combining personal and
commercial credit information in one report Experian provides a complete
picture of their creditworthiness of small businesses Experian is listed on
the London Stock Exchange under the symbol (EXPN) from experience 2013
annual report they are 4.7 billion in revenue in 2013. North
America accounted for 48% of their total revenue, Latin America 21%, UK and Ireland
19%, Asia Pacific 12%. Experian’s headquarters are in Dublin, Ireland.
Experian’s business records are spread 80 countries that Experian
services, experian's reaches across four main geographic regions including North
America, Latin America, UK and Ireland and the EMEA and Asia pacific a typical
Experian business credit report will include a company’s registration and
ownership detail’s, trading addresses how quickly the businesses paying it’s bills
a credit risk score,
court judgments, history of financial performance, a typical Experian Business
credit report will also include business background information company financial
information credit scores and risk factors banking, trade and collection
history, liens, judgments, and bankruptcies, uniform commercial code filings.
Experian’s most recent score system is known as Intelliscore plus which they
boast of as the next level and credit scoring this method was released in 2008.
Intelliscore Plus takes into accounts hundreds of variables to offer a
business score between 0 and 100 with 100 being the highest, intelliscore plus
is advertised as a highly predictive score that provides a very detailed and
accurate reflection of a business’s risk intelliscore actually predicts a
business’s risk of going seriously delinquent or over 91 days late or
having a major financial issues such as bankruptcy within the next 12 months.
O to 100 is a percentile score that reflects the percentage of businesses
that score higher or lower than the specific business being looked at for
example if the business has a score of 20 this means that companies scores
better than 19% of other businesses that also means that 80% of other businesses
score higher than that business. 998 displays as a score when there is a
bankruptcy within the last two years,
999 displays when there is not enough information to score report, intelliscore
is already being widely used, many of the largest financial institutions
worldwide use it along with over half of the top 25 P&C insurers and most
major telecommunications and utility firms industry leaders and
transportation manufacturing and technology have also been known to use
intelliscore as their primary risk indicating model. The new intelliscore plus
has over 800 aggregates or factors that affect the credit scores, scores are
assessed on the more than 7.2 million businesses in experian’s database.
Experian first takes a business and looks at data segments such as firmographics,
public records,
collections, and trade information, then places each business in one of three
different models, the first is their commercial model, for small, medium, and
larger businesses,
second is their blended owner model, where the commercial data in then linked
with the owner’s information, thirdly there is the intelliscore plus or
the percentile score. Intelliscore Plus, just like FICO, has multiple facets to
the entire score makeup, the score is still based on the payment history of
the business, but many other factors tie into percentages of the overall score,
the historical behaviour or payment history accounts for 5-10%
of the total score, current payment status, trade balances, and percent of
accounts delinquent account for 50-60% of the score makeup. The
businesses credit utilization affects 10-15% of the total score. This has
to do with the amount of credit that has been extended to the business in
relation to the balances they currently have on those accounts, the company
profile, age of business, industry risk, and sized of business assessed by number
of employee’s accounts for 5-10% of the total score, and
10-15% of the total score is determined based on the derogatory items,
collection, liens, judgments, and bankruptcies that business has.
Historical behavior accounts for 5 to 10 percent of the total score, age
industry and size accounts for five to ten percent of the total score, credit
utilization account for 10 to 15 percent of the total score, derogatory
items accounts for 10 to 15 percent of the total score, payments, balances,
accounts for 50 to 60 percent of the total score. When Experian is
assigning a business
a credit score they take many factors into account, they refer to these factors as
predictive data, and use this data to better determine a business’s lending
risk, Multiple factors affect the score, including average balances on accounts,
how recent are the delinquencies what number and what percent of account
are current versus delinquent the percent of balances seriously delinquent the
overall utilization ratio and any balances on leases. Data is collected
from credit obligation information from suppliers and lenders. Legal filings from
local, county and state courts, company background information from independent
sources, including state filing offices, public records, credit card companies,
collection agencies, corporate financial information and marketing databases, and
combined with data from other sources including actual trade payment
experiences submitted by payees, public record information, collections
information, company background and comparative data that places a company’s
payment performance in context within its industry. Scores are based on
a number of factors contained in your business credit report including number
of trade experiences, outstanding balances, payment habits, credit
utilization, trends overtime,
public record recency, frequency and dollar amount, demographics such as yours
on file
standard industrial classification codes and business size. From Experian the
intelliscore is calculated by a statistically derived algorithm, designed
to determine risk based on multiple factors, credit number of trade
experiences, balances outstanding, payment habits, credit utilization and trends
overtime,
public records recency, frequency and dollar amounts associated with liens,
judgments or bankruptcies, demographic information
years on file standard industrial classification or SIC code
and business size. Another score offered by Experian is the financial stability
risk score or FSR, which predicts potential of a business going bankrupt
or defaulting on its obligations, the financial stability risk score or FSR
identifies the higher risk businesses by utilizing payment or public record
such as, severely delinquent payments of 61+ and 91+ days, high utilization of
credit lines, tax liens, judgments, collection accounts, risk industries, low
years in business and much more,
the scores range from 1-100 and its broken down into 5 risk classes, from
Experian financial stability risk score is the perfect tool to identify slow pay
but will pay accounts and thus set the appropriate deposit or other risk policy,
managing existing account is highly efficient since you focus on the bottom
10% of scores for the power of financial stability risk score captures 60% of
potential risk accounts. Experian blended score comes with a one page
report providing summary information on both the business and the business owner,
research shows that a combined business and owner credit scoring model is more
predictable than business or consumer only scoring models, study showed that
when trouble hit a business blended scores dropped an average of 30% over
the four quarters leading up to the bad event, their consumer scores of
the owner showed no statistically significant decline over the same period,
the score evaluates the personal information on the owner as it relates
to business performance, 53% of problems for a business revealed their first
signs of credit problems on the business credit reports, 46% of problems first
showed up on the owner’s personal report, blended scores outperform
consumer or business alone by 10-20% because they look at both the
business and owners scores and interesting fact is that of the more
than 500,000
suppliers extending credit only about 10,000 report to Experian here is how
long item stay on your Experian business report, trade data 36 months,
bankruptcies 9 years and 9 months,
judgments 6 years and 9 months, tax liens 6 years and 9 months,
uniform commercial code filing 5 years, collection 6 years and 9
months, bank government and leasing data 36 months. Things that can lower
your Experian score include current collections, liens, judgments, bankruptcies
or other derogatory public records on your business profile, the status,
recency, frequency and dollar amounts of any applicable liens, judgments or
bankruptcies, an increased trend in slow payment of obligations. Other items that
can lower your score include an increase in the number of business credit
inquiries or applications that are generated by the business or the owner,
the number of trade experiences, balances, outstanding, payment habits, credit
utilization and trends overtime,
years in business line of business or standard industrial classification or
SIC code size of business and other demographic data. Here’s some advice from
Experian regarding score management make sure that your vendors are reporting
your payments, because the more vendors that report a positive credit history to
the credit reporting agencies, the higher your business credit rating will be,
repair the damage, the quickest way to begin to improve bad credit is to pay
off your debts, decreasing the balance on your business credit cards can have an
immediate impact on your businesses credit rating, if you have good credit
requesting a credit line increase can improve your credit even more because
such an increase lowers the percentage of your available credit in use. The
negative that lower your score stay on your credit report for seven years and
can harm your business credit rating, don’t close
positive accounts and don’t apply for a lot of new credit, try to keep your
balance at 20% to 30% of your credit limit. Equifax is the oldest and largest
credit bureau in existence today, they were originally founded 1898, 70
years before the creation of TransUnion, Equifax was gathering details about
people including their marital troubles, jobs, school history childhood, sex life
political activates, and more, in response when the US congress met in 1971 it
enacted the fair credit reporting act. Equifax’s main business credit scoring
model is the credit risk score, this score was created to predict the
probability of a business customer becoming seriously delinquent on
supplier accounts, or bankrupt, within a 12 months period,
credit scores range 1-100 with a lower score indicating the higher risk
of serious delinquency. By definition the score predicts the likelihood of a
business incurring a 90 days
severe delinquency or charged off over the next 12 months,
scores of 90 days and above express that obligations are being paid as agreed,
scores from 80-89 indicate payments are being made 1-30 days overdue, scores
of 60-79 represent payments being paid 31-60 days past the agreed upon due date,
credit scores between 40-59 indicate payments being made 61-90 days
overdue, scores between 20-39 mean obligations are being paid 91-120 days
overdue, scores between 1-19 mean obligations are being paid
120 + days past the due date.
Here’s a quick summary of how the scores is calculated paid as agreed 90+,
1-30 days overdue 80-89, 31-60 days overdue 60-79, 61-90 days overdue 40-59,
91-120 days overdue 20-39, 120+ days overdue 1-19. Equifax also provides a
business credit score for suppliers known as the small business credit risk
score for suppliers, this model is designed to help credit grantors
improve their risk assessment and reduce delinquent rates while helping to
improve profitability, the score utilizes unique bank loans, lease information,
credit card data, and supplier, telco and utility credit history,
public records and former graphic data from their own Equifax commercial
database, the small business credit risk or for suppliers credit scores range
from 101-816, Equifax also offers a business failure risk score with many
reports, this risk score predicts the likelihood that the business will fail
or file for bankruptcy within the next 12 months period, this model helps
identify businesses that pose a greater risk for failure so that suppliers and
credit grantors can take appropriate actions. Paydex, Intelliscore, and the
small business risk score are the most popular business credit scores, a
positive score can be obtained in as little as 60-90days with all three
reporting agencies, paying business bills as agreed will net a positive credit
score at all three reporting agencies. Contact as today to learn how to build a
positive business credit score with both Experian and Equifax.