Understanding Business Credit Scores

When searching for financing or a loan, one number that lenders look at is your credit score. It is basically a quick and easy way for lenders to see how risky you are for them to lend to. However, individuals aren’t the only ones who have a credit score, businesses can too.

This article is going to introduce you to the topic of business credit scores, how they are different from personal credit scores, how they are determined and more.

How is a Business Credit Score Different Than a Personal Credit Score?

The main difference between them is the scale and range. A personal credit score in the USA ranges from 300 to 850, but a business credit score ranges from 0-100. The higher your score, the less risky you are and the more likely you will be able to borrow more money at a lower rate.

Other than that, these scores are quite similar in terms of their use by lenders. Both tell the lender how risky you are to lend money to, and how you have handled your credit in the past. Along with the score, lenders will also be able to check out your personal or business credit report, which gives a more in-depth look.

How is Your Business Credit Score Determined?

So how is it determined what sort of credit score you will get? Well, that depends. See, in the USA, there are three main credit bureaus that deal with business credit scores. Each of these three credit bureaus have their own way of determining the business credit core that your company will be given.

They each verify and use information differently, so remember, your score could vary depending which company you go with. Also, the aren’t perfect, and sometimes they can get information wrong so if you think something isn’t right, don’t be afraid to bring it up with them and see what they can do.

Generally, bureaus will take into account your credit repayment history, the likelihood of your business failing, the likelihood of your business failing to make payments and more. As long as you are running your company successfully, paying your bills and reinvesting/saving for the future, you should be fine.

How to Build Credit as a Business?

If your business credit score is lower than you’d like it to be, you will need to build credit to help it get back on its feet. Thankfully, building credit for your business is not that different from building credit for yourself. You can simply and easily increase your business credit score by:

  • Paying off your debts as quickly and efficiently as possible
  • Using credit responsibly and always ensuring you are paying back what you owe
  • Keeping your credit utilization relatively low, so lenders know you are using it how you should

By doing things like these, and making sure your other financials are looking good, you will be well on your way to building a better credit for your business, which will make securing loans and getting a lower interest rate much easier. While there is no requirement for the bureaus to provide you with a free copy like there is with personal credit reports, you can purchase one for a fee and it can help you identify problem areas and what you should be doing to build up your credit.

We hope that this article has helped you learn the ins and outs of a business credit score, and why it can prove to be so important to your business and it’s success over time.

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