Business credit scores combine payment history, existing credit and other financial factors to measure a business’s creditworthiness. Dun & Bradstreet is a leading provider of business loans, so if you’ve ever applied for a business loan or line of credit, the lender may have checked your Dun & Bradstreet number to assess your company’s credibility and financial stability.
Because your D&B score can make or break your approval for a business loan, it’s important to understand what affects your rating and find ways to improve it if necessary. Here’s a closer look at Dun & Bradstreet credit scoring and how it can help your business access funding and investment.
What is a Dun & Bradstreet Business Credit Score?
Like a personal credit score for your personal finances, the Dun & Bradstreet credit score indicates the financial stability of your business. D&B bases this rating on a variety of factors, including company size, assets, liabilities and owner’s equity.
The D&B Rating, which lenders or investors can review to determine a company’s creditworthiness, consists of two parts: a Rating Classification and a Composite Credit Score.
- Rating Classification: This combination of letters and numbers indicates the size of the business based on its value or capital. The ratings range from HH, which indicates a small business with a net worth of less than $5,000, to 5A, which represents businesses with a net worth of $50 million or more. Your business will only receive a Rating Classification if you have provided D&B with a current financial statement.
- Composite credit score: This credit rating ranges from 1 to 4, with 1 being the best and 4 indicating that your business is a risky candidate for credit. If you do not submit financial statements to D&B, the best your business can achieve is a score of 2.
Other types of D&B credit scores
While the D&B rating provides an overall picture of a company’s creditworthiness, D&B also produces a number of other business credit scores, including:
- D&B Paydex Account: This score is primarily based on your past payments to creditors. It ranges from 1 to 100, with 100 being the best. A score of 0 to 49 indicates a high risk of your company making late payments, 50 to 79 a medium risk, and 80 to 100 a low risk.
- D&B Security Account: This score also indicates whether your company is at risk of late payments or bankruptcy. It ranges from 1 to 5, with 1 indicating a low chance of late payment and 5 indicating a higher risk of missing payments.
- D&B Failure Score: This score also ranges from 1 to 5, but it indicates the chance that your business will experience financial stress—for example, filing for bankruptcy—in the coming year.
- D&B Supplier Assessment Risk Rating: The SER Rating, which rates businesses on a scale of 1 to 9, indicates that a supplier may become inactive or close in the next year. This rating is useful for suppliers and businesses looking to join their supply chains.
- Maximum Credit Recommendation: D&B can also make a recommendation on how much to lend to a business based on its size, industry and payment history.
- D&B Cyber Risk Rating: Finally, D&B also provides a Cyber Risk Rating to show how vulnerable suppliers are to cyber attacks.
Why does your business need a D&B rating?
Establishing and maintaining a business credit account is critical if you want to get credit to grow your business. A strong D&B rating shows lenders that your business is a good candidate for a loan, line of credit or credit card.
“Lenders use it to assess financial risk, so it’s really the lifeline of any small business,” says Brian Bond, Experian’s senior vice president of Business Information Services. “A good business credit score can help a business qualify for better interest rates and get a loan without the need for a personal guarantee, reducing personal liability.”
On the flipside, a poor D&B rating indicates your business is a high risk for new credit. A low rating could mean you’re stuck with high interest rates or unfavorable repayment terms, or you may not qualify for financing at all. Without access to financing, it can be difficult to build your customer base or expand your operations.
How Dun & Bradstreet Credit Score is Calculated
Dun & Bradstreet collects information about your business’s payment history from creditors and suppliers to calculate its rating. As a business owner, you can also provide information to D&B so that it can calculate your score more accurately.
D&B calculates your credit score based on financial information from your business, including:
- Payment history on loans and other lines of credit.
- Outstanding balances.
- Business transactions.
- Public records.
- Years in operation.
Paying your debts on time will improve your D&B rating, while late or missed payments can drag it down.
How to check your Dun and Bradstreet rating
To get your Dun & Bradstreet number, you must sign up for a credit monitoring plan. D&B offers a two-tier plan:
- Free Credit Information: This free plan alerts you to changes in direction in four D&B scores: Your Paydex Score, Line Score, Default Score, and Maximum Credit Recommendation. It also shares information about your company, business transactions and legal events.
- Basic Credit Information: To view your D&B Score, you must sign up for Credit Insights Basic, which costs $49 per month. This plan gives you access to your D&B Score and other D&B scores, while also showing historical trends in your credit scores. It also details any legal events such as liens or UCC filings.
Tips for improving your business credit score
A strong D&B credit score can make it easier for your business to access financing at affordable rates. There are several ways to improve your score:
Review Your Credit Reports
Read your business credit reports to see what affects your rating. You can check your report from a credit reporting agency that provides the score, such as Dun & Bradstreet or a third-party service. If you notice any errors, report them to the credit bureau and request that they be removed.
“Because credit scores are constantly changing, it’s critical to monitor your business credit report to spot any potential problems, such as fraud,” says Bond.
Make Payments on Time
Your payment history on business loans and lines of credit greatly affects your business credit score. On-time payments can build and maintain a strong rating, while late or missed payments will drag it down.
“The most important tip is to pay the company’s bills on time,” says certified financial planner Ohan Kayikchyan. “Or better yet, pay before the scheduled due date.”
If you’re struggling to keep track of payments, finding a system to organize your bills and make payments easier can help.
Reduce your credit utilization
Increasing your credit utilization ratio, or the amount of credit you use compared to what’s available to you, can also have a negative impact on your score. Reduce your credit utilization by paying off balances. Increasing your credit limit can help lower your rate as long as it doesn’t push you to spend up to the new, higher limit.
“Keep your business credit card and line of credit utilization rates under control and don’t max them out,” advises Kayikchyan.
Submit your information to D&B
As mentioned, you can only get the best D&B Rating 1 if you provide financial information to D&B. D&B can still generate a score without your input, but providing up-to-date supporting documentation can help improve your score.
D&B offers credit building plans that allow you to provide proof of on-time payments to help raise your score. These plans start at $149 per month and also include access to all your D&B points.