When it comes to borrowing money, a business credit score is a lot like your personal credit score, it gives credit agencies, vendors/suppliers, and loan issuers an idea of how trustworthy your business is. It indicates to them your creditworthiness. If you own a business and you want to understand your business credit score, keep reading.
What is it?
A business credit score is a credit score that applies to your business. They are generally determined based on the information in a business credit report, which typically includes things like the number of employees the business has, historical data, payment histories, amounts owed, account information, and more.
Business credit scores do not fall on the same scale as personal credit scores. In fact, in most cases, business credit scores use a ranking of 0 to 100. That being said, the FICO Small Business Scoring Model uses a scale of 0 to 300.
Benefits of a Good Business Credit Score
There are several ways that building a good business credit score can help your small business:
Personal and business finances are separate
It will be easier to get access to business financing
Insurance rates may be lower
How to Calculate Business Credit Scores
Much like a personal credit score, the most critical factor in your business credit score is your payment history. That is whether or not you make debt payments in a timely manner.
A business credit score also takes into account the age of your company, which means the longer you’ve been around, the higher your score may go. Debt/debt usage is also a factor when calculating a business credit score, as well as the type of industry you’re in and the size of your business.
Where to Check Your Business Credit Score
You can easily get a free look at your personal credit score. However, this is not true when it comes to business credit scores. In most cases, you’ll be required to pay for your business credit score. Here are some places you can check your business credit score:
Dun & Bradstreet
Experian Intelliscore Plus
Tips to Improve Your Business Credit Score
In order to improve your business credit score, you will follow the same basic steps you would if you were improving your personal credit score. If you want to have the best business credit score, you should consider the following:
Pay bills and expenses early or on time
Establish business credit that reports to the credit bureaus
Use credit regularly and responsibly
Keep an eye on your business credit score
Don’t max out your business credit
When it comes to building a strong business, a good business credit score is critical. Just like with personal credit, these scores provide some insight into the success of the business to potential business partners, investors, and creditors.
You can do this by building good financial habits. If you need help, contact Means Commercial Capital. We will be happy to help you understand business credit and the importance of your business credit score.