Your business credit score: what it is and why you should care

By this point, you’re probably aware that you have a personal credit score – you know, that number that tells lenders how good of a borrower you’d be?

But did you know your business can have a score of its own? 

That’s right. If you’re the director of a company registered with the New Zealand Companies Office (NZCO), lenders can use your company’s business credit score to determine if it is creditworthy. Doesn’t matter if you’re a scrappy startup, small family business or large enterprise.

It’s not just lenders who can check your score, but other businesses as well. For example a potential product supplier might want to check your retail business’ score before giving you product to put on your shelves. 

What is a business credit score and credit report?

There are actually two categories of score the major credit bureaus have developed to give lenders and other potential partners an idea of how much or little of a risk it is to work with you. 

For example, illion offers the following categories of credit analysis, which include scores and reports. 

Late Payment Risk Score and Report

This is more like a typical credit score that aims to answer the question: how likely is it that this business – whether yours or anyone else’s – will make a payment on time?

Your business is rated on a scale of 0-799. The higher the score, the less likely you are to miss a payment.

It also incorporates business data from the NZCO and other sources to tell you:

  • If any of the directors were ever part of a failed business
  • Who operates the business and who is responsible for payments
  • If anyone has taken legal action against the business
  • If the company operates in a high risk industry

Premium versions of the product can give you a more in-depth look at payment habits and recent payment experiences. 

Failure Risk Score and Report

This score aims to answer the question: Is this business likely to experience financial distress or failure? 

It goes from 1,001 – 1,999. The higher the score, the less likely your business is to fail.

The report also contains much of the same business information as the Late Payment Score and Report, but with the Failure Risk Score swapped out in place of the Late Payment Score. 

You’d need it when viability and stability from your partners is more critical than a late payment or two. 

More than 50 risk factors go into the calculation.

What is the difference between your credit score and your credit history?

Your business’ credit score (sometimes called a credit rating) is simply a number that lets you see at a glance how creditworthy a business is relative to other businesses. In the case of illion, it’s how likely it is a business will pay its bills on time.

A credit report (also called a credit file or credit history) is a more in-depth look at the actual payments a business has made in the past. 

A business credit report can often contain much more information than what you’d find in a personal credit report because of the amount of extra public data that’s available about companies – such as the data you can find from NZCO.

Why is it important to know your business credit score?

Any lender or potential partner can pay to see your credit score to determine if they want to lend you money or otherwise do business with you.

So wouldn’t you like to know what’s in there before they do?

With knowledge comes power, and with knowledge of your score and what’s in your file, you have the power to:

  • Identify any mistakes. Credit bureaus rely on information from lenders and other data suppliers to calculate your score. If something in your report looks off, you can alert both the bureau and the lender to try and get it corrected.
  • Fix any holes. Your credit report will show you any payments that are still outstanding or that are in default. You can then make those payments right away to keep them from continuing to affect your score.  
  • Work on boosting your score. New Zealand uses a positive credit rating scheme, where the major banks have to share positive information about your payment history instead of just the negative stuff. If your score is lower than you’d like it to be, that can be encouragement enough to start improving it through timely payments.  

How can you see your company’s credit score and history?

Credit Simple for Business is the perfect place to see your business credit score and credit history. 

It taps into illion’s database to let you see what others can see about you if they check, including:

  • Your Late Payment Risk Score
  • Your Failure Risk Score
  • Business information like: who the directors are, any legal issues, etc. 
  • Your credit history including payment history

It also gives you the ability to submit updated information to illion about your business if it needs to be included. 

To access your company’s credit score through Credit Simple, you must be listed as a director of the company with the New Zealand Companies Office (NZCO) and will need to provide the company’s New Zealand Business Number (NZBN).