If access to affordable financing and capital is a part of your business plan, learning how to understand and
build business credit scores should be a priority.
For business owners, a
good business credit score translates into lower interest rates, better trade credit, and access to the financial support necessary to grow and maintain your business.
That means a strong personal credit score (with a long payment history) can be helpful when building strong
business credit scores as well.
However,
business credit scores range on a scale of 0 to 100, and these scores are based almost entirely on a company's ability to pay its bills and invoices on time.
It's something we recommend because the bureaus and lenders will look favorably on a company that can pay early, which will result in much
higher business credit scores and indexes.
Having a
low business credit score will impact whether lenders will work with you and can determine whether companies will do business with you.
Business credit scores use some of the same factors (such as payment history) to determine your score, but there are some important differences.
A variety of third parties — including banks, credit card issuers, insurance companies, leasing firms, investors, and so on —
pull business credit scores to evaluate risk and reliability.
While your personal credit can influence your ability to obtain a business credit card, your company will also develop its
own business credit score and history over time.
Knowing where your personal and
business credit scores stand can help you evaluate potential lending opportunities and get to where you need to be to qualify for the best options.
Further on, we also explore alternatives that companies can turn to, and obtain a better card despite a
poor business credit score.
Before you apply for a business loan, find out your
current business credit score, update any missing or incorrect information, and take steps toward improving it.
Unlike consumer credit, which largely revolves around a fairly standardized credit ranking system,
business credit scores tend to vary based on the reporting company or bureau.
If these damaging reports can be removed from the report, the
overall business credit score could dramatically increase by as much as 50 points or even more.
By reporting those payments to commercial credit agencies you can help your clients build positive business credit references that help them build
strong business credit scores.
As part of the application process, lenders will check your personal and
business credit score as well as your business financials.
This may include your personal credit score and credit history or a personal guarantee, which may be necessary if you have a
low business credit score or limited credit history.
Business credit scores use some of the same factors (such as payment history) to determine your score, but there are some important differences.