How to Read the Equifax Business Credit Report? With Top 4 Factors Affecting Business Credit Score
You are likely to be familiar with the term “credit report” if you have opted for a home loan or car loan in the past. But do you know that, just like loans, businesses want to avail of trade credit from their suppliers to get some extension on the payment terms? If you are a large business owner who wants to offer trade credit to your potential clients, it is necessary to view their business credit reports “first.” It contains instrumental financial information of companies, including their business credit score, that will help you decide whether to accept or reject their trade credit request. Since Experian, Equifax, and Dun and Bradstreet are the three major credit bureaus that offer the credit report of multiple businesses to other companies, it’s the Equifax business report we will talk about in this blog. Here, you will find the answer to the most sought-after question, i.e., “how to read Equifax business credit report.”
But before we start diving into the details of “how to read Equifax business credit report,” let’s see what business credit score is:
What is Business Credit Score?
For companies that need to offer trade credit to other organizations, the Business Credit Score is a number that will help you decide whether a company is suitable to become your business partner or not. In general language, people also know business credit scores as “commercial credit scores.” All the credit bureaus out there calculate business credit scores using the company’s credit obligations and repayment histories with the lenders and other organizations.
They also factor in other things while calculating the business credit scores, such as:
- Any legal filings like judgments, tax liens, or bankruptcies
- The duration of the company’s operation
- The type and size of their business, and
- Their repayment performance compared to other similar companies
Now that you have got an overall picture of the business credit score let’s shift your attention to:
What is the use of a Business Credit Score?
Usually, businesses need to see the credit score of other companies to decide whether to offer them trade credit or not. It is one of the main factors amidst many others that will help you know how likely your prospective business partner is to pay the bills on time for the products or services they buy from you. But you can come to such a conclusion only when you have full access to the business credit report of other organizations that you can buy from a prominent business report vendor online. Not just that, you also need to know “how to read Equifax business credit report” for a better understanding of their business documents. Now, let’s take a look at:
What is a Good Business Credit Score?
Although most credit bureaus offer a single credit score between 1 to 100, you will find three different scores in an Equifax business credit report, i.e.,
- Payment Index Score
You can understand the Payment Index Score as your typical credit score. This number ranges between 1 to 100, where 1 indicates the worst performance and 100 the best performance. Remember that this number gets generated by evaluating the payment history of your prospective business client. If they pay their invoices on time, their score will be somewhere between 90 to 100. However, in a specific case, if even one of their bills is due after 30 days, their score could lie somewhere between 80 and 89.
- Business Credit Risk Score
When it comes to the business credit risk score of Equifax, they stay between 101 and 992. If your prospective business client has obtained a higher score, it shows they carry lower risk. A rule of thumb for business credit risk score is that if you see your possible business partner has received a score over 556, it shows their good financial health. But, if that score is 0, it conveys bankruptcy.
In short, this score will help you find answers to various questions like:
- Will, I get paid?
- When will I get paid?
- Is my potential client going through any financial difficulty?
- How much trade credit should I extend?
- Business Failure Score
The Business Failure Score you see in the Equifax credit reports is a “number” between 1,000 and 1,610, where a lower score represents a higher risk of your potential client ceasing their business operations in the coming 12 months. Equifax calculates this score by sifting through their commercial demographic data, company legal records, and credit and payment information.
What factors impact a company’s Business Credit Score?
- The timely payment of their bills
- The timely payment of their debts
- Credit applications, if any, and
- Credit card balance utilization
We hope you are now familiar with several terms in the business credit reports and have learned how to study Equifax business credit reports. So, if you want to purchase an Equifax business credit report for your potential business clients, please head to the top-ranking business report shopping site on the internet.