June 26 Costa Mesa, Calif.—Credit scores that blend business and consumer information offer companies a better view of small-business risk, according to a study Experian released Monday.
The study was designed to address the question of which credit information is the leading indicator of a credit risk.
“For small businesses that are new, there’s a lot of overlap of the finances of the owner and the business itself,” said Dan Meder, senior director of commercial credit risk solutions at Experian. “The idea of bringing business and owner [data] together made sense.”
Looking at data from Experian’s Business Owner Link database over 16 quarters, Meder found that 82% of the owners had no problems with negative credit. Among the remaining 18% with credit problems, 53.5% had bad business credit, while 47% had bad personal credit. “We found that in small businesses, with less than four employees and around less than three years, the personal finances of the owner went bad first,” Meder said.