A majority of people, whether they are business owners or not, are familiar with Experian as being part of their personal credit report.
What many might not know is that Experian is also a major player when it comes to business credit reporting.
The personal and business side of Experiean are two different animals, so today we will discuss what business owners need to know about the Experian Intelliscore Plus model.
This is what most banks and lenders use when qualifying a business for a loan.
What is the Intelliscore Plus Credit Score?
The simple answer is the Intelliscore Plus credit model is a credit-risk evaluation system used by thousands of banks and lenders nationwide to provide insight on how much of a risk a business or business owner may be.
The Intelliscore works much different than its consumer model as it uses a more simplistic scoring model which ranges from 1 -100.
Intelliscore Plus Credit Score Range?
As discussed, the Intelliscore uses a more simplistic scoring system ranging from 1 – 100, what does that score mean to you?
Just as with personal credit, the lower the score the higher the risk, and the higher the score the lower the risk.
Businesses will want to at least be in risk class 2 to ensure the best results when applying for a business loan.
This chart will breakdown the score by risk level.
As mentioned earlier, the Experian Intelliscore is widely use across this country for business loans and it’s considered one of the more reliable tools for lenders to predict risk.
How Is My Intelliscore Plus Credit Score Calculated?
The Intelliscore uses more than 800 variables to determine risk and a score, but we can breakdown these variables into the following key components:
Payment History: Although the term “recency” is formally used in the Intelliscore determination, what you need to know as a business owner is that this means nothing more than current payment status.
- How many times has your commercial account become delinquent?
- What percentage of your total account are currently delinquent?
- What is your overall trade balance?
Frequency: Frequency covers many aspects related to payment patterns and derogatory accounts.
Payment patterns are important to this score and most business scores as its not always about paying on time but more about how early did you pay before the due date.
Paying early will reap the most benefits for your company’s credit.
Frequency will also look at past and present accounts in collections, the amount of liens and judgments one might have, as well as any bankruptcies filed and discharged, both for the business or personally.
Monetary: This is the category most have become familiar with on their personal credit because it has to do with credit utilization.
How much credit has been extended both to the business and personally?
Are the current balances close to the credit limit caps on the accounts?
Are any portion of the balances currently delinquent?
I know this can seem overwhelming to many business owners and especially new start up companies.
If you do have limited history, the Intelliscore will use a blended model where personal credit might have more bearing because there is a lack of data available on the business.
How Do You Improve Your Score?
There is not 1 way to improve your score, but several factors which are used to build it.
Here are some tips that can set you on the right path.
Make your payments on time and early.
It’s not only important to pay your business bills on time, but paying them early is a factor that can push your business score higher, not only with Experian but with D&B and SBSS as well.
Of course its easier said than done so at least make sure your accounts are being paid on time.
This will establish a payment history pattern that will prove your company to be low risk.
Watch that Debt.
Many times you need to take on debt to make money.
Just be careful how you extend yourself.
Be careful of going over 50% of your revolving credit limits as that can become a negative.
Also make sure that when you make credit card payments that you are paying before the credit bureau reports.
Many business owners tell me they use the cards to pay debt throughout the month and then lump sum pay them off at the due date.
The problem with that is most credit companies report to credit when they issue your monthly statement.
This means your credit report will show high balances because it was reported before you made those lump sum payments.
Now over leveraging tytourself not only can push your score down but the higher your monthly payments are the higher your debt to income ratio can be which can make qualifying for loans more difficult.
Use your credit.
This is one of those scenarios where if you don’t use it, you will lose it.
If you have credit cards and don’t use them they become dormant and won’t be a factor into helping your credit score.
Also, your creditors may close your card for non use.
Credit cards are important to any credit score, both in business and personal credit, so make sure you have them and use them wisely.
Always try to keep those balances below 30% – 40% of the high credit limits.
Pull Your Business & Personal Credit.
You have to know where you stand, so pulling both business and personal credit reports is extremely important.
It’s not just about making payments on time, but your business and personal data such as name and address need to be correct.
So there will be times a business owner will need to update the information with the bureaus.
You can pull your Intelliscore here to review and update your business records.
Questions? Call Joe Schuck: VP of Sales