The FICO SBSS, or Fair Isaac Corporation’s Small Business Scoring Service score, has become an increasingly important factor in small business borrowing. We describe below what the FICO SBSS is, how it works, what goes into a FICO SBSS score, and more.
What Is the FICO SBSS?
You’ve probably heard of FICO already. It stands for Fair Isaac Corporation, which is the group responsible for the ubiquitous personal credit score. If you have ever borrowed money personally or for your business, you’ve come in contact with how important this three-digit valuation of your creditworthiness can be. Banks and alternative lenders use it. Landlords use it. Homeowners and auto insurance dealers? They use it, too.
SBSS is a three-digit number that measures how well your small business has repaid past loans. SBSS stands for the Small Business Scoring Service, and in short, it does for small businesses what FICO’s personal credit scoring service does for individuals. .
In other words, it’s a risk assessment of lending to your small business. Since it provides lenders with an, efficient and systematized measurement of a credit recipient’s ability to pay, lenders can use it to process small business loan applications faster.
How Does the SBSS Work?
Most importantly, the FICO SBSS draws information from both your personal and your small business’ financials, instead of just one or the other. You can think of it as a sort of hybrid credit score, which makes it a more comprehensive assessment tool for small business lenders.
Unlike your personal credit score, which ranges between 300-800, the FICO SBSS score ranges from 0 to 300. A score in the high 200s is considered to be a good credit score.
What Goes Into Computing an SBSS Score?
FICO uses the information on your loan application along with the data it gets from consumer and business credit bureaus. In addition, FICO also looks at your time in business, assets and liabilities, cash flow, revenue, liens, and judgments, as well as other financial details of your business. All of this information is then processed through their modeling system and the result is your FICO SBSS score.
The lender is provided with your FICO SBSS score, the reason codes, and your credit details.
Because the FICO SBSS applies to businesses of drastically different sizes, it naturally adjusts according to how much information it has access to. That’s a good thing, because a very small business and a small-to-medium business can have equally good FICO SBSS scores, so there’s no advantage given based on the size of your company.
It is important to note that the FICO SBSS is used to validate for loans up to $1 million. Your lender receives the FICO SBSS score, the reason codes, and your credit details.
Why Do We Care?
Your small business’ score could affect whether you can get a loan or not. If you do get the loan, the SBSS can affect the credit limit and terms of that loan.
If you’re considering applying for an SBA 7(a) loan, you’ll generally need a FICO SBSS score of at least 140—and often they look even higher, for a score of 160 or more. If you are concerned that your score is not high enough to qualify, you can make efforts to improve your credit scores before applying.
Beyond the Small Business Administration, plenty of alternative lenders make use of the FICO SBSS, as do some banks. The FICO SBSS is an important factor in many lending decisions. Maintaining good credit personally and in your business can help you have more options if you decide it’s time to consider additional funding for your business.