How Is My Business Credit Score Determined?

A business credit score is quite similar to a personal credit score – it is a personal snapshot of a credit picture at a specific point of time. It identifies the potential risk associated with negotiating financial or credit terms with financial institutions and vendors. In essence if the credit score is poor it can affect a business’ ability to obtain capital to develop, grow or expand.

Your credit score tells a story about your business – about how reliable your payments for bills and vendors are, about what level of risk is associated with supporting, investing or seeking financial support. Interesting enough, even though ones credit score is crucial for a business, fewer than 10% of all entrepreneurs know about or truly understand how to establish and maintain positive business credit.

How is a Business Credit Score determined?

Like a personal credit score, a business score is developed over time. The more time allowed to build credit, the more potential for a good credit score to be obtained. This is obtained through the gathering of data from vendors about payment history, including cash flow, returned checks, working capital, net worth and financial resources; business reports and corporate filings; third party claims – collections, legal suits, etc., and if necessary first-hand accounts and investigations. Your score can also be affected by the amount of available credit you have on bank lines of credit and credit cards, the length of time you’ve had a credit profile, the number of inquiries made on your credit profile and more. The major business credit bureaus that compile and provide copies of the reports are Dun & Bradstreet; Experian Business; Equifax Business; and Business Credit USA. All information sent in to the credit bureaus is sent in voluntarily – there is no guarantee that all the efforts made to build your business credit are being effective as this information may not be reporting. Another key to establishing a business credit profile and score is to find companies that will establish credit for your business without using your personal credit information and then report the payment experiences to the business credit bureaus. By reporting the information to the proper agencies, they’ll help you establish your business credit profile without jeopardizing your personal credit score.

What does a Business Credit Score look like?

Business credit scores range on a scale from 0 to 100 with 75 or more considered an excellent rating. Personal credit scores, on the other hand, range from 300 to 850 with a score of 680 or high considered excellent.

How can you Strengthen a less than Stellar Business credit score?

There are certainly situations where ones credit score could be inaccurate. There have been times when other company’s information has been inaccurately combined with another – similar names or other overlaps. One of the first recommendations is to consistently check your credit score to ensure no errors have impacted the rating. Ensure that when you contact them, you have all the necessary documentation to resolve the situation as quick as possible – ensure you follow up with the credit bureau to make sure they have corrected the errors. Then, to ensure it remains accurate, consider checking it on a regular basis – the frequency to be determined by your business needs.

If there is no error in the business credit score, you can start improving your credit report with a few easy steps. First, ensure you are aware of when all bills are due – pay them on time and consistently. Don’t allow payment deadlines to pass; pay in advance if at all possible. There are also opportunities to self-report. In these situations, if you have positive relationships and consistent payments with a vendor that is not part of your current credit report, you can have the vendor submit the data or submit it yourself to provide more data for the credit report.

A good business credit score is simply one of the most important aspects required for a business to grow, to obtain capital or negotiate financial support. It is also important to not become passive about your credit score – stay on top of it, ensure it is accurate and ensure that all positive credit is reported to the credit bureau to continue to build good credit.

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George Clooney is a Loan Consultant, provides support for businesses all across the US particularly with obtaining credit cards for business.