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The 4 Business Credit Tiers: How They Impact Your Business

As an entrepreneur, it’s essential to understand the different types of business credit tiers available to you. This article will examine the four business credit tiers and what each entails. We’ll also discuss your business credit score and how you can improve it.

The business credit score ranges are crucial for your business opportunities and success. That is why improving your personal and business credit score is very important. Our recommendation for improving it faster is to open net 30 vendor accounts, but we will get to that a little later.

 

What are the four business credit tiers?

Business credit is an essential tool for entrepreneurs. It allows you to access the capital you need to grow your business without risking your assets. There are four tiers of business credit, each with its benefits and drawbacks. First, you should understand the different types of business credit. , How they can benefit your business, and how to get your net 30 vendor account to fast-forward your business goals.

The four business credit tiers are:

  • basic trade credit
  • advanced trade credit
  • bank lending
  • investors

So let’s get into it.

 

Tier 1 of business credit – Basic trade credit

The first business credit tier is basic trade credit. This type of credit is typically extended by suppliers and vendors in the form of lines of credit or net 30 terms. Trade credit is a good option for new businesses or small to medium-sized ones. Why? Because companies just starting or trying to expand usually don’t have their business credit established.

Opening a Net 30 vendor account is a great start for new businesses to get the cash flow and build their credit history.

 

Tier 2 of business credit – Advanced trade credit

The second tier of business credit is advanced trade credit. This type of credit is similar to basic trade credit. Still, it’s typically extended by larger suppliers and vendors with more favorable terms. Advanced trade credit can be a good option for businesses that have already established some business credit but still need to build up their credit history.

Most SMBs are in this category. SMBs can benefit from Net 30 vendor accounts to expand and have more opportunities to build their business.

 

Tier 3 of business credit – Bank lending

The third tier of business credit is bank lending. This is the most common type of business credit. This type of credit is typically extended by banks in the form of loans or lines of credit. Bank lending can be a good option for businesses that have established strong business credit and need access to capital.

The problem occurs when your business doesn’t have enough credit history and a good enough credit score to get a loan in the first place. Small to medium-sized businesses or new ones have the most problems getting loans. The most important thing is improving credit history and building business credit.

 

Tier 4 of business credit – Investors

The fourth and final business credit tier option is – potential investors. This type of credit comes from private investors in the form of equity financing. Equity financing can be a good option for businesses with solid growth potential that need capital access.

 

What Are The 4 Business Credit Tiers - How They Impacy Your Business Relationships

 

Business credit score ranges – what does your credit score mean?

Your business credit score means the financial health of your business.

It’s a number that a credit bureau calculates using your credit history.

It shows how “risky” or stable your business is.

The difference between personal credit and business credit score is its calculation. A business score ranges from zero to 100. SMBs often have problems because they need to score at least 75 to be considered for a loan.

That is why it is so crucial for SMBs to build their credit history and improve their credit score. The best way to do that is by building your business through successful transaction history, which is then improved.

That opens an opportunity for your business to secure a line of credit or better financial terms.

 

 

Dun & Bradstreet Paydex score ranges

Dun & Bradstreet Paydex score - assess your credit risk with DnB

Business credit reports obtained from Dun & Bradstreet contain a large amount of information, including the maximum, recommended credit limit for your business, and other information.

But, the most critical factor that impacts your Paydex score is payment history.

In simple terms, your Paydex business credit score is a numerical representation of how long it takes for your business to pay its debts.

Your Paydex scores range from 0 to 100 – with 0 being the worst and 100 being the best. Below, you’ll find a quick explanation of how you can interpret your Paydex score. 

  • Paydex score 80-100 = There is a low risk of late payment, your business usually pays its debts before or on the due date.
  • Paydex score 50-79 = There is a medium risk of late payment, your business usually pays its debts 1-30 days after the due date.
  • Paydex score 0-49 = There is a high risk of late payment, your business usually pays its debts more than one month after the due date.

If your business is labeled low risk, lenders can easily expect you’ll repay your credit as promised. But if your business is labeled high risk, lenders will expect you’ll be late with every payment if you even pay them.

Ideally, you’d want to achieve at least a Paydex score of 80, as you’ll want your business to be labeled as high risk.

To get a better insight into your Paydex score, please check their Paydex Value Chart.

 

Experian Intelliscore ranges

Experian Intelliscore - Business Credit Score

Even though Experian’s Intelliscore uses a scale from 1 to 100, it works differently than Dun & Bradstreet’s Paydex score.

Intelliscore uses numbers to categorize your risk of, as they point out, seriously derogatory payment behavior. Unlike Dun & Bradstreet, they use many more factors to determine your Intelliscore. Below, you’ll find a quick explanation of how you can interpret your Intelliscore.

  • Intelliscore 76-100 = There is a low risk of derogatory payment behavior
  • Intelliscore 51-75 = There is a low-medium risk of derogatory payment behavior
  • Intelliscore 26-50 = There is a medium risk of derogatory payment behavior
  • Intelliscore 11-25 = There is a medium-high risk of derogatory payment behavior
  • Intelliscore 1-10 = There is a high risk of derogatory payment behavior

Keep in mind, even though payment history is an extremely important factor overall, the following is used to calculate your Intelliscore:

  • Outstanding balances
  • Credit utilization
  • Typical repayment
  • Liens, judgments, and bankruptcies
  • Business age, industry, and size

To learn more about Experian Intelliscore, visit their official website, which explains everything you’ll need to know.

 

Equifax Business Credit Risk score ranges

Equifax Business Credit Score Risk - Assess your credit risk with Equifax

Unlike Experian and Dun & Bradstreet, Equifax uses a very different range for their Business Credit Risk score.

Equifax Business Credit Risk score ranges from 101 to 992, with 101 being the worst and 992 being the best.

Similarly to Paydex and Intelliscore, the Equifax Business Credit Risk score assesses how likely your business is to be late with payments. Even though Equifax didn’t publish specific ranges for its business credit tiers, keep in mind that they do exist and will most likely be published soon.

Important to note – even though the score ranges from 101 to 992 – you could still get a 0! This happens only when your business declares bankruptcy.

 

How is a business credit score different from a personal credit score?

Personal and business credit scores are similar in how they are built. They are also similar in the way they are estimated. But a business credit score ranges differently.

Different credit rating agencies calculate a business score. Some of the most common ones are TransUnion, Equifax, Experian, and Dun & Bradstreet. A business score goes from zero to a hundred.
But the business score is not measured in one way. Instead, it differs from one financing lender to another.

A business score can often be tricky to access. Unlike personal credit score, which is free and easily checked, you have to request to see your business score and do that through credit bureaus. They can charge you a fee for this service.

 

The importance of separating your personal and business credit

When your business score is being looked at, your business and personal credit score can be evaluated.

It is best to separate your personal and business score from the start. When those are intertwined, they can also negatively affect each other. Even if it seems easier to use your personal credit card when starting a business, it is best to separate it for future obligations.

You don’t want a bad personal credit score affecting your business score.

That becomes a challenge since your personal credit score (FICO) is still looked at when you are a small to medium-sized business. That is why Burst Biz specializes in bringing solutions to SMBs. We think that SMBs deserve equal financial opportunities as big businesses.

 

Personal credit score ranges

Personal finance history is also essential. It represents your spending habits. It showcases how you pay your bills (on time or not) and how you handle your finances, whether you are in debt, have loans…

All this information then creates a personal credit score. Your personal credit score is looked at whenever you want to get a credit card or a personal loan.

Your personal credit score also plays a significant role in your financial life. Lenders use it to decide whether or not to give you a loan, which can also affect the interest rate you’re offered. That’s why it’s essential to understand what your credit score means.

A credit score is a number that represents your creditworthiness or how likely you are to repay a loan. Credit scores usually range from 300 to 850; the higher your score, the better. A good credit score is typically considered above 700, while anything below 600 is considered poor.

Suppose you have a business credit score in the excellent range. In that case, you’re a low-risk borrower, and lenders will be more likely to approve your loan applications. A high credit score can also help you get better loan terms, such as a lower interest rate.

On the other hand, if your credit score is in the poor range, you’re a high-risk borrower, and you may have difficulty getting approved for loans. It’s essential to keep an eye on your credit score and take steps to improve it if needed.

Several factors can affect your credit score, including payment history and credit utilization.

By monitoring your credit score and taking steps to improve it, you can ensure that your business has access to the financing it needs to grow and succeed.

If you want an excellent personal credit score, you should pay your bills and other finance invoices in time.

Depending on the model, a personal credit score typically ranges from 300 to 850. Basically, the higher the score, the better. You can check how you rank through the credit score range FICO model. Lenders or banks first look at when someone wants to apply for a loan.

Improving your business credit score with net 30 vendors

Improving your credit score is essential if you want the best loan interest rates. It is also vital for your business to grow. A great way to do this is by opening a net 30 vendor account. This type of account can help improve your business credit score, which can help you get better terms on future loans.

To open a net 30 vendor account, find a reputable provider and apply for an account. Once approved, you’ll start using the account immediately to improve your credit score.

How does that work? This transaction is reported when you open a Net 30 vendor account and pay your invoice on time. This way, you can create your credit history and improve your business credit.

Get your net 30 vendor account today!

Today, we’ve gone through 4 business credit tiers and explained all business credit tiers in detail.

If you’re a new business owner or looking to start a new business soon, we recommend first focusing on mastering tier 1 of business credit.

To obtain more business credit fast – you’ll want to open a net 30 vendor account and start building your payment history!

Here’s a short FAQ to quickly learn about net 30 vendor accounts!

#1 What is a net 30 account?

A specific type of trade credit where the payment is due in full 30 days after the item is purchased. Net 30 accounts are an excellent way for a new business to establish trade lines and payment history on their business credit reports.

#2 How to get a net 30 vendor account?

Opening a new net 30 vendor account has never been easier. All you have to do is – complete a purchase on Burst Biz! Once you do that, we’ll provide you with a $4000 credit limit to spend on Burst Biz products and subscriptions. All you’ll need is basic company information and your EIN.

With Burst Biz, you’ll have more access to business credit cards and loans. The first step towards this is building your business credit. In that case, you’ll want to open a Net 30 Vendor Account with Burst Biz.

Once you’ve decided to apply for a Net 30 Vendor account, you’ll need to complete your first purchase. It’s that simple! We’ll instantly provide you with a Net 30 Vendor Account!

#3 Can I get more than one tradeline?

Once you make your first purchase, we can provide you with the opportunity to increase your credit limit! Get other tradelines and grow faster by making ongoing purchases with us.

Explore the Burst Biz website, and If you have further questions, please get in touch with us or visit our FAQ page. Start building your business!

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