A business credit score provides potential lenders with a rating on your company’s overall credit, including factors such as payment history, current credit utilization and company size. These scores work similarly to your personal credit score, with that being said, we will discuss a few key differences below. Just as you want a good personal credit score to borrow funds, the same can be said for you and your company.
How a Business Credit Score Works
There are a few significant differences between your personal credit score and a business credit score. Simultaneously, a personal credit score ranges from 300 to 850, a business credit score spans from 0 to 100. Credit bureaus do not have a standardized set of rules that they must adhere to when calculating credit scores for businesses. As a result, your scores could vary from bureau to bureau.
Also, while consumers are entitled to one free credit report every 12 months, you must pay for your business credit score every time. They are also public records, so you can view any business’s score at any time.
The Benefits of a Strong Credit Score
Lenders will evaluate your business credit score when deciding to approve a loan. A high score will make it easier to obtain financing, help you achieve lower rates and help you be approved for larger amounts. Some lenders will also evaluate your personal credit score – especially if the loan is for a small business – but a business credit score can provide additional information on your company’s financial strength.
Improving Your Company’s Credit Score
Similarly, to a personal credit score, credit bureaus consider payment history and the length of time you have had credit accounts. The best way to build a solid credit score is to make payments on time, every time. The amount of outstanding debt, liens or bankruptcies from your past are other factors that may impact your overall score.
Business credit reports can have wrong or missing data on them. If you don’t know your business credit score, you should consider getting a report. That will allow you to dispute any erroneous data that may bring your score down. You also want to look for any information that appears fraudulent, such as accounts you didn’t open.
You may also want to provide updated information about your company to the bureaus, such as the number of employees you have and revenue growth, to help build your score. Some bureaus consider your business’s long-term value when creating your score and your long-term ability to repay any loans.
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