Do Corporations Have Credit Scores?

If you were to run my credit report, you would get three scores, one from each of the credit reporting agencies.

Would it be possible to do the same thing with a business? Do banks have a default method of determining a business’ credit-worthiness, like they do with consumers? Or do they have to dig more deeply into it?

Dun & Bradstreet does credit reports on businesses. I get a call from them about once a year verifying information about my company.

of course they do. just this: the bigger the corporation and the potential loan, credit scores become less meaningful than fundamental analysis of the company’s finances, management, and long-term prospects. credit scores are more applicable for individuals and small businesses.

Dunn and Bradstreet used to be the gold standard for this. They’re still around, but over the last ten years, their focus has shifted from financial reporting to sales. In any event, a bank would be more likely to dig more deeply, including review of a business’ financial reports (particularly the balance sheet) and trade references. (Edit: Yikes! did it really take me ten minutes to type this?)

Corporate bonds have the whole AAA to junk ratings provided by Moodys, Fitch, standard and poors, which is effectivly a credit rating for the corporation issuing the bonds.

any time I’ve had to set up a new vendor at work, they’ve asked for bank and trade references.

Businesses (not just “corporations”) are subject to credit scrutiny in a lot of ways, not just rating or score.

Companies that earn poor credit reputations can be killed by it; I’ve seen it happen.

D&B is what my employer uses.

In every business I’ve owned or started, we started getting the D&B phone calls by the time we had 5 or 10 employees. I refused to answer most of their questions, and for the rest, they used whatever information I gave them without checking it out.

I wouldn’t consider their reports to be worth diddly.

We collect accounts receivable and send them to Experian, and sell a variety of Experian reports and reports we create in-house. I think we also sell D&B and Equifax reports, but that’s not my bailiwick. (I just crunch data.) One of the reports we sell is the IntelliScore Report (google for sample), which scores a business on a 0 o 100 scale.

To be clear, this is not Consumer data. It’s businesses reporting their experiences with other businesses. Required data comprises an account number, business name, address, city, state, ZIP code, terms, account balance, current amount (i.e., amount owing that is within terms), 01-30 dats beyond terms, 31-60 DBT, 61-90 DBT, and over 90 DPT. Optional fields include additional business name, additional address, phone number, comments or comment codes, and so forth. Experian has a relatively new format for their Business Credit Data that allows more aging buckets, fax, tax ID number (EIN), SSN (for proprietors), email addresses, and a bunch of other stuff. Since most businesses report to us using Excel files, we normally don’t get most of the data that can be used by the expanded format.

Whether they have correct information from you or not, D&B does get information reported to it by third parties, such as credit cards in the company name. And really, who cares if they have your address or industry wrong, when they accurately know whether you pay your bills on time?

(This isn’t an endorsement of their reports - I’ve never actually run one, but I have dealt with them regarding some of that information reported by third parties.)

Fine and dandy for a large corporation, but for small businesses, they really don’t know anything. Your suppliers want a good relationship with you, so they’re not likely to give bad reports to D&B. Corporate credit cards are typically one of the first things paid off, so those reports will look good.

I’ve gotten back good D&B reports on companies that I later discovered were teetering on the edge of insolvency.

Yes, I can see that happening. Even if they don’t want to damage a relationship, most suppliers just don’t bother. It’s often not reported unless there’s a judgment or a collections agency gets involved.

Still, it’s not that the information from D&B was inaccurate, it just wasn’t complete. Evaluating the health of any business really does require using a few lines of investigation. D&B is a good tool (from I have heard) but you certainly would not want to rely on it exclusively. I have seen banks call major suppliers to check on the current balances and payment history before making loan approvals, for example.

Absolutely true. Gather as many data points as you reasonably can, discard the outliers, and let the rest tell the story.