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The credit score you've never heard of

By Garrett Sutton/

Imagine checking your FICO score and finding out it is 300. You'd probably be crushed; after all that's the lowest (and worst) score you can get under most FICO credit scoring models. But if you were an entrepreneur applying for a small business loan, you could break out the champagne because when it comes to FICO SBSS (small business scores), 300 is the highest score you can get.

Don't be surprised if you haven't heard of the FICO SBSS scores. The small business scores created by FICO are still largely a mystery and can be confusing to prospective borrowers, even though they can play a crucial role in the loan you hope to get to fund the growth or expansion of your business. But if you own a business, or hope to in the future, you should learn about them. Numerous lenders use FICO SBSS models and they play an important role in many Small Business Administration (SBA) loans.

Since January 2014, the SBA has been using credit scoring to prescreen 7(a) loans up to $350,000 with a couple of exceptions (SBA Express and Export Express). "SBA loans offer the most attractive interest rates, so if you want to get a small business loan, it's important to know this score and know it's up to snuff," says Levi King, CEO of Creditera.

Here are a few things you need to know about these important, but largely unknown, credit scoring models.

The range

  • The score range is 0 - 300, and like a consumer FICO score, a higher score is considered stronger because it represents less risk to the lender.

The formula

A wide variety of factors go into these scores. These may include:

  • The owner/co-owner's personal credit information
  • Business credit history, age of the business, years in business, etc.
  • Financial data, such as business assets, cash flow, etc.

Beyond that, specifics are very difficult to come by. Unlike the "FICO formula" that describes the main factors that go into credit scores and the impact they have on your credit history. As with all FICO scores, there are many different models and lenders may customize scores to their business needs.

I've found that business credit is a source of confusion for many owners, who don't know it exists and don't know how to build strong business credit. This process of building business credit can be different than it is for personal credit. For example, while using a credit card can be helpful when building a strong personal credit score, some business credit cards won't appear on your business credit reports unless you default. And it's much harder to identify companies that report to business credit bureaus than it is to find ones that will report to the major credit reporting agencies that sell consumer credit reports, where almost any auto or mortgage lender will report payment history on a regular basis.

Unlike consumer lending, if you are turned down for a small business loan due to your business credit reports and/or your business credit scores, lenders aren't required to tell you why your application was rejected.

The workaround

If you have very high personal credit scores but little in the way of a business credit rating, you may be able to meet the minimum score required, at least for an SBA loan. And some lenders may be willing to offer funding if you have very high personal credit scores and other qualifications such as strong collateral and great business potential. "Some lenders will look more at the story than at the score," says Rocco Fiorentino, whose firm, Benetrends, helps franchise owners obtain financing.

I recommend you get a comprehensive view of your credit as soon as you decide to start a business. Business owners should always stay on top of their scores. Here's how:

  • You can get two free personal credit scores at, updated monthly.
  • Creditera offers some business credit scores for free, and a FICO SBSS score is available for purchase.
  • You can purchase several different types of business credit reports and scores from the three major credit bureaus.
  • DNB (Dun & Bradstreet) offers free alerts to changes in your business credit file.

In my forthcoming book, Finance Your Business, co-authored with Gerri Detweiler, I explain the myriad types of information that can go into business credit scores and how to build yours.

Business owners are wise to invest the time and energy into establishing strong personal and business credit before they need to borrow. It's hard to build one fast, and when the opportunity to expand arises, you want to be ready to take advantage of it.

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