What is FICO SBSS? (Hint: It Could Help Your Business Grow)

Potential business lenders may be interested in your FICO SBSS score—here's what you need to know about it, and how you can help improve it.
Head of Content and Editor-in-Chief, Fundera
July 14, 2016

As a small-business owner, you have plenty on your mind every day, from inventory orders and marketing plans to late invoices or equipment repairs.

Chances are, you're probably not thinking about your FICO SBSS score, though.

But you probably should be. Here's why.

What is the FICO SBSS?

First of all, what does this acronym stand for?

Coming from the Fair Isaac Corporation—or FICO, the company that introduced personal credit scores in 1989—the FICO SBSS is a Small Business Scoring Service.

You can think of it as a credit score for small businesses specifically, as opposed to your personal FICO credit score or your business credit score.

How FICO Gets Your SBSS Score

Although it's separate from your personal and business credit, your FICO SBSS isn't entirely unique.

Instead, it combines both scores into one. Your FICO SBSS takes both your personal and business credit into account for its calculations.

Since the FICO SBSS combines the importance of personal credit with your business credit, you could potentially overcome a less-than-stellar personal credit score with smart business spending.

—Meredith Wood, head of content, Fundera

The reason behind this is simple: When it comes to small-business financing, lenders care a lot about your personal credit because they see your business as an extension of the owner. If you have poor financial habits in your personal life, they believe, then you might make bad business decisions as well.

Since the FICO SBSS combines the importance of personal credit with your business credit, you could potentially overcome a less-than-stellar personal credit score with smart business spending. You can also still focus on building your personal and business credit without worrying about a third score, too.

Why FICO SBSS Helps Small Businesses

There's another reason the FICO SBSS works well for small businesses especially: It's a flexible score that changes with your business size.

“Small business" is actually a big category. The U.S. Office of Advocacy defines small businesses as those with fewer than 500 employees, which covers roughly 99.7 percent of employer firms in the country.

And there are major differences between businesses with one or two employees, those with 20 or 30, and those with 400, including everything from their legal ownership and taxation structures to what sorts of financing they can qualify for.

That's why the FICO SBSS score accounts for the size of your venture, so businesses with drastically different challenges and needs can all have equally good (or bad) scores.

The FICO SBSS Score Range

Unlike your personal credit score, which ranges between 300 and 850, the FICO SBSS covers scores between 0 and 300.

Some factors in your FICO SBSS include:

  • Personal credit history
  • Business credit history
  • Business financial data
  • Time in business
  • Assets and liabilities
  • Cash flow
  • Revenue
  • Liens
  • Judgments

However, we don't know what else FICO takes into consideration for your FICO SBSS or how much they weigh each of these factors.

Why Your Business Needs to Know

Ever since the Small Business Administration started looking at FICO SBSS scores, lenders and banks across the country have followed suit.

And since your credit is a major factor in your loan application (not to mention, any type of trade finance), you should be aware of your FICO SBSS score—and ways you can help improve:

  • Pay your debts to lenders, vendors, and suppliers back on time, in full. Late payments may seriously hurt your credit score.
  • Review your personal credit reports annually. You can get one free credit report, per year, from each credit bureau.
  • Don't close out old credit accounts—that can shorten your credit history, which is important to your score.
  • Use business credit cards to start or build your business credit.
  • Keep an eye on your utilization for credit cards and lines of credit. Using 20 percent of each credit source, at most, is usually a good goal to aim for.
  • Check to make sure the vendors and suppliers you work with report your on-time payments to credit bureaus.

You also might want to check out FICO's alternate SBSS scoring models for a few different industries to see if your business should focus on anything special.

Photo: iStock
The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any financial or business strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
Head of Content and Editor-in-Chief, Fundera