2b. Scoring A business credit score is a mathematical model that is used to depict a business’s risk of defaulting on an account within the next 12 months. Business credit scores reflect the likelihood that a customer will pay the merchant back as agreed. Merchants use business credit scores to help them make decisions as to who to lend money to and at what interest rate and terms. Business credit scores are very different from personal credit scores, for many reasons. Firstly, a business credit score reflects the business’s likelihood of defaulting on an obligation, not the business owners. Most business owners have their own consumer credit scores established. Their business also has its own score, based on how the business obligations are being paid. Consumer and business credit scores also differ in their fundamental makeup. Consumer credit scores outline a consumer’s risk of going 90 days late on an obligation within the next 24 months. Business credit scores reflect the business’s risk of going 90 days late on an obligation within the next 12 months. Consumer credit scores range from 350-850, with 850 being the best. Credit scores of 800 and above are considered excellent credit. Scores of 700 and above are typically considered good credit while scores of 600 reflect average credit. Consumer credit scores of 500 reflect below average credit and scores of 400 or less reflect poor credit. Consumer scores have five main components. Each of these components carries a different percentage of the overall credit score makeup. The largest aspect of the score relates to payment history, which accounts for 35% of the overall credit score. With consumer credit scoring, the consumer’s available credit or their use of their accounts is the second largest score factor, affecting 30% of the overall score. The length of time the credit file has been open for accounts for 15% of the overall score. The credit mix and the amount of new credit that the consumer is applying for each account for 10% of the overall consumer credit score.