Business Credit Scores

If you’re a business owner then having good business credit can help you avoid using your personal credit, get competitive business loans, better rates on insurance, and more. Business credit scores are similar to personal credit scores – yet there are some key differences. This article will help you better under business credit scores.

Your business credit is one of the most important ingredients in building a business. Building a business credit score can help you in some very important situations.

What’s a business credit score?

How to establish and build business credit?

How to see your business credit score?

–

What’s a business credit score?

Simple. If you know anything about personal credit, then business credit is a similar concept. Your personal credit score is a 3 digit number which helps lenders decide whether to give you credit, and the terms of that credit. The higher your score, the more likely you are to pay off your debt on time, and punctually. When you’re applying for loans or credit cards, this information is used.

Business credit is similar, but it applies to your business. Lenders will look at it to minimize their risk when giving out business funding. Business credit reporting agencies look at your business’s financial history and put together an assessment of your business for lenders. It’s essentially what your business credit score represents.

The higher your score is, the more likely you are to get approvals for potential loans from lenders. It’s also going to lower your insurance premium.

The difference between your personal credit score and business credit score

There are a few huge differences between the two types of credit scores.

Personal credit score is scored on a 300 to 850 scale. Business credit score is on a 1 to 100 scale. Scores over 75 are considered excellent.

Businesses don’t have a social security number, they’re tracked by name/address/EIN number.

Unlike personal credit, business credit scores are public information. Anyone can go to one of the major reporting agencies and look it up

There are several business credit reporting agencies like D&B, Equifax, and Experience. You have to apply to these bureaus in order to be tracked. D&B use what is called a D-U-N-S number.

Is a business credit score needed?

Regardless of whether you’re a startup or already in business, you might not be thinking about your business credit score. It’s hard to blame you. For many people, this isn’t even on their radar until something happens which forces them to realize its importance. Many people don’t look at it, or look at business credit report, so they don’t know if it’s accurate.

Establishing business credit comes with a number of advantages

• Get business loans at lower rates
• Take out business loans without a personal guarantee
• Make your business look good. Investors and business partners may request to see your score.

How to establish good business credit

It’s similar to building good personal credit. One common mistake is that assuming as long as you pay your bills on time your business credit is fine. Many lenders don’t report to commercial reporting agencies. This could lead to all of your on-time payments not being reflected. Here are some important things you can do to ensure you’re building business credit.

Make sure you’re legally registered

Incorporate, and get an EIN number. Some business credit reporting agencies will use this instead of your SSN to track your business credit.

Get a business credit card and bank account

Keep the business card for business, and personal credit card for personal expenses. It’s important you follow good habits to build both PERSONAL and BUSINESS credit, like keeping your credit utilization low, and making consistent payments.

Work with vendors that report to credit bureaus 

If you’re not sure whether a vendor reports payments to the credit bureaus, feel free to ask them. You should prioritize working with vendors who successfully report payments, as it will help you improve your business credit score.

Pay on time / early

The best way to help improve your business credit score is to make payments on time. Don’t make late payments, because this can hurt your score. If you pay early, this can drastically improve your score. For example, the Dun and Bradstreet PAYDEX score, awards you if you pay vendors early.

Check your score regularly

This is important, but it will cost you. It’s worth tracking your business credit scores.

Does personal credit matter for business?

Certain business credit scores take both personal and business into account. Your personal and business credit reports are kept in separate databases. They don’t impact the other. There are some business credit card and financing options that report to both commercial and personal credit.