There are a number of factors that impact business credit risk scores. Keep in mind that most risk models are built using multivariate statistical methods that not only look and each attribute but also look for the interaction between the attributes. However, there are three general factors that will impact a business score.
Recency: How recently has the business been delinquent?
Events that have happened recently tend to be most predictive of business behavior in the near future. For example being days beyond credit terms (DBT) in the past 30, 60, and 90 days will tend to negatively impact, on average, a business’s credit score versus those that are current.
Frequency: How frequently is the business delinquent or applying for credit?
If a business has multiple beyond terms events then the algorithm will reflect this behavior and will tend to impact the score to the low side. In addition, if a business is frequently applying for credit (called inquires) then this will also negatively impact the score.
Monetary/Usage: How large is the debt burden?
Business’s that carry large balances in relation to credit limits tend to be more risky than those who carry lower balances in relation to credit limits. This is called the utilization ratio or balance-to-limit ratio. As the debt burden increases interest payments also grow placing more stress on cash flows. This tends to negatively impact a business’s risk score.