Just like a personal credit score, a business also has a credit score that gives loan issuers, credit agencies, and suppliers and vendors with an idea of how much they can trust a business when lending money. It works in a similar way to personal credit scores since a higher score will let relevant parties know that your company is more creditworthy. Whether you have just started your own business or are considering borrowing money for your business for the first time, here’s what you need to know about your business credit score.
How Your Business Credit Score Works
Your business credit score is a credit score that is applied to businesses rather than people. In general, a business credit score is determined using information gained from the business’s credit report, which may include several company details including historical business data, the number of employees hired, past payment history, accounts owed and more. Business credit scores do not fall on the same numerical range as your personal credit score. They are mostly ranked on a scale of 0 to 100.
How a High Business Credit Score Benefits Companies
If you are just starting out in business, you need to build your credit score. There are many benefits of building a strong business credit score, including helping your company access credit and funding without having to rely on your personal credit to do so. In addition, it allows you to keep your business and personal finances completely separate, which can be helpful when you’re filing your taxes each year, and ensures that your personal assets are not leveraged against you if your business encounters financial problems.
How Business Credit Scores are Calculated
Similar to your personal credit score, your payment history is the factor with the largest impact on your business credit score. Whether you make payments on time or are falling behind into debt will have the largest impact on the score. Business credit scores also consider a range of further details including how long your company has been established, and businesses that have been in operation for longer may have a higher score as a result. The size of your organization and the type of industry you operate in may also be considered.
Where Can You Check Your Business Credit Score?
Although looking at your personal credit score can be done easily and free of charge using a range of platforms, checking your business credit score can be trickier. In some cases, you may need to pay a fee to see the credit score for your own business. There are various business credit reporting agencies including Equifax, Dun & Bradstreet Credit Signal, and Experian Intelliscore Plus. You can sign up with them online to check your business credit score and see your business credit report.
Just like your personal finances, your business will also have a credit score to help lenders determine how creditworthy your company is. Understanding how it works and how to improve it is crucial for any business owner who needs to borrow money.