By Gerri Detweiler and Lydia Roth, Nav
Here’s a wild fact about business credit that you may not know: Suppliers, vendors, and even business partners can look up your business’s credit score, anytime they want, without notifying you and without your permission.
So, we did it with Donald Trump’s holding company, The Trump Organization, Inc., and The Clinton Foundation.
What is a business credit score?
Similar to personal credit, business credit scores and reports offer one way to determine the credibility of a company by looking into how it has handled debts and obligations in the past.
Business credit reporting agencies collect information on a business when that business utilizes credit. This could mean the use of business credit cards, repaying equipment leases or a business loan, or working with creditors that report business activity to credit reporting agencies.
Lenders, vendors, and suppliers may look up a business’s credit score to evaluate it for things like financing or trade credit. The U.S. government can review business credit when a company applies for a large contract. Even potential business partners may look into a company’s reports before deciding to do business with it.
So even if you’re not running for President, it’s important to keep a close eye on your business’s credit scores. (You can instantly check your business credit summary report for FREE here.)
How Trump Stacks Up
The Trump Organization, Inc.’s business credit score as of September 23, 2016, is a 19, putting it below the national average score by more than 30 points.
This score ranges from 1 to 100. The higher the score, the better. Lenders may be more cautious when considering lending to The Trump Organization because it falls under a medium to high-risk category, and will likely look into what credit factors are bringing down the score before they decide if the business is a viable borrower.
Here’s what could be negatively influencing the score of the Trump Organization:
- Payment status: Payment status is the most important factor when it comes to business credit scores, accounting for approximately 50% of the score. This one’s tricky, though, because business credit payment history works differently from personal. Instead of a 30-day grace period, a payment that is even one day late can be reported on a business credit report as a slow or delinquent payment. The Trump Organization has 23 accounts listed on the report, 9 of which are reporting delinquent, and this scoring model predicts that The Trump Organization will pay 17 days beyond the terms provided by its creditors.
- Derogatories: derogatories include things like bankruptcies, UCC filings, and more. There are three items causing derogatory marks in The Trump Organization’s score:
- Collections: This includes any accounts that have been turned over to a collection agency.
- Tax Liens: If a business has a tax debt to the federal or state government that is not paid in full within 10 days of the date on the demand for payment, it is possible that a Notice of Federal Tax Lien will be filed. That tax lien may then show up on that business’s credit reports for up to ten years.
- Judgments: If a judgment appears on a business credit report, it likely means the business was the defendant in a lawsuit and now has an obligation to pay any court-ordered damages.
What’s good in the Trump Organization, Inc.’s reports
The Trump Organization’s company history extends 35 years, a factor that likely has a positive effect on its business credit scores. Company information such as years in business and industry risk level have a small impact on business credit scores, but a longer business history is indicative of continued success, and thus can boost scores.
How Trump can improve his business credit scores
For most businesses, establishing business credit is the first step toward building strong credit scores. Separating personal and business expenses and obtaining a business credit card or other accounts that report to commercial credit agencies are great first steps.
In the case of a business like the Trump Organization, Inc., which has a number of active accounts open in the name of the business, a good course of action to establish good business credit scores would be to take care of any delinquent accounts that are being reported, and—most importantly—make on-time or early payments in the future.
In addition to the Trump Organization, Donald Trump is a major stakeholder in over 500 businesses, some of which have stellar business credit scores. While Trump is considered the businessman candidate in this year’s election, The Clinton Family’s non-profit foundation also has credit scores.
The Clinton Foundation’s Business Credit Scores
As of Sept. 23, 2016, The Clinton Foundation has a business credit score of 42. The Foundation’s score puts it in the same risk category as the Trump Organization. According to the reports, the Foundation has no derogatories, low credit utilization, a mix of different accounts and a projected payment trend of 0 days beyond terms.
Neither The Trump Organization nor The Clinton Foundation responded to an immediate request for comment for this article.
Keep in mind that business credit scores are not necessarily accurate. In fact, 25% of business owners who check their reports find errors that negatively affect their scores. Unless and until Donald Trump or The Clintons check their business’s scores, there may be misinformation on the reports bringing the scores down. Finally, something on which both parties can agree: It makes sense to check your business credit scores.