Do you know your business credit score or are you effectively flying blind?
But what is a business credit score? How do you find out your score? What do you do if your score is low? Read further to find answers to these questions and more.
What is a business credit score?
Equifax, Experian and Dun & Bradstreet rate your business credit score on a number between 0 and 100 – this is calculated using the information on your business credit file. Each bureau gets a grasp of your credit by looking at debt history and your payment information dealing with vendors, banks and credit lenders. It’s important to note that each credit bureau has their own way to measure your business’s creditworthiness.
Where can I get my business credit score?
You need to pay to receive your business credit score directly from a credit reporting bureau, such as Equifax. CreditSignal, an affiliate of Dun & Bradstreet, allows small businesses to receive a business credit report for free.
Some providers that offer personal credit monitoring also offer business credit monitoring and related services.
Need financing for your business? Useful guides to get started
How is it different from a personal credit score?
A business credit score is attached to you by a Employer Identification Number (EIN), unlike a credit score that uses your Social Security number. Personal credit history is measured by Equifax, Experian and TransUnion and you can only have one individual profile with each.
Business credit history is measured by Equifax and Experian, as well as, Dun & Bradstreet. Unlike personal credit scores, you can have multiple profiles dependent on how many businesses you have.
The are way less factors that go into a business credit score than a personal one. Also, consumers have better legal protection than businesses when it comes to credit scores, as it is much harder to challenge an account dispute as a business.
What impacts a business credit score?
Your business credit score is calculated using the information listed on your company credit file. This information includes:
- Credit inquiries. Your business credit shopping patterns and the type of credit you’ve applied for can increase your credit score.
- Time in operation. A newer business may be deemed riskier than a business that has been incorporated a longer time.
- Commercial credit information. Defaults, judgements and court writs.
- Company details. This includes the company structure, legal entity name, business address, directors, shareholders and more.
- Information on the public record. This can include recorded liens, lawsuits, judgements or delinquent taxes.
How do I avoid damaging my business credit score?
Business defaults and late or missed payments are some of the main contributing factors to a low score. Here are three tips to avoid damaging your score:
- Don’t push your business credit cards to the limit. This will harm your credit utilization ratio. Bureaus may see this use of credit as a sign that it is your last resort, which could label you as a higher risk.
- Don’t open many lines of credit. It can be tempting when chasing rewards and offers, but it isn’t worth it if you want to maintain a high business credit score. That being said, if you do have older lines of credit that you use minimally, you should keep them open if you’ve had a good repayment history.
- Know your score. Not knowing if you need to address problems can be detrimental too.
How do I improve my business credit score?
If you’re interested in building your business credit score, it’s important to use some form of credit. When your business credit is going unused, the business credit reporting agencies won’t have anything to report. A good rule of thumb is to have at least three accounts and build a history of timely payments.
With that being said, it’s more important to only use credit when needed. If your business has the cash flow and doesn’t need a loan to finance expenses, you could consider a business credit card or line of credit to only access financing when you need it.