Understanding your personal credit score and how to keep it healthy is essential for your personal finances, and your business’s credit score is just as crucial for your business’s financial health. However, it may not be as apparent to you what your business’s score is or how to establish it. Think of this blog as your 101 class on a Business Credit Score, giving you some of the basics you need for your toolbelt. Here are four things you need to know about your business credit score:
What is a business credit score?
Business credit can refer to two things. First, it can mean the credit given to a business instead of a person. A typical example is a business credit card, which covers business expenses. Second, business credit can refer to how creditworthy the business is as an organization. Business partners, lenders, and others can evaluate this worthiness by looking at the business’s credit report. There are multiple reports and reporting agencies – for example, Equifax offers several credit scores exclusively for businesses. One score is the Business Credit Risk Score™, which helps lenders understand whether a company is likely to pay its debts.
Why does it matter?
Business credit matters because it can open – or close – financial doors. The Small Business Administration (SBA), suppliers, banks, and other lenders rely on these scores and your personal credit score when providing lines of credit or extended payment terms. If your business credit history is lackluster or poor, people and other companies are less likely to work with you or invest in you.
Most of the time, both personal credit scores and business credit scores are used to consider whether or not they’ll lend to you. Lenders will also weigh in factors such as:
- Longevity: How long have you been in business? If you’ve been in business for a while, that will contribute to raising your score.
- Revenue: What are your annual revenue? If your business brings in revenue, significant or not, that may positively impact your score.
- Assets: What assets are named as the business’s? If you have some assets under the business, such as property, this is likely to raise your credit score.
- Outstanding debts: What loans and credit cards do you currently have? Responsible credit usage will positively impact your credit score.
- Both personal and business loan and credit history: How long have you had personal and business credit? What loans have you had in the past? What was the value of those loans, and how quickly did you pay them off? History that indicates your likelihood to pay back loans in the future can affect your score and make you more attractive to lenders.
- Public records: This refers to UCC filings and other reports, including liens and judgments against you.
- Industry risk: Some industries like bars and restaurants are historically riskier than others, and lenders view them differently based on historical data.
How do I establish my business credit score?
Establishing your business credit score isn’t all that different from establishing good personal credit. We had Michelle Lambright Black, a well-known credit expert and founder of CreditWriter.com, break it down for you step-by-step in this blog.
How do I check my business credit score?
There are several ways to check your business credit score. You can use traditional agencies like Equifax, Dun & Bradstreet, and Experian to pull your business credit score. However, each time you want to check your score, you may have to pay to see it. The price ranges depending on the service you use and the report you want to see. You can also do an online search for “free business credit report,” but you may encounter some scams.
There are also options like Markaaz, which is building an all-in-one Dashboard. With the Dashboard, you can access cash flow insights, view invoice statements, discover your website and customer analytics, and get your business credit score. It also seamlessly integrates into our directory of over 100 million pre-verified businesses and the payment solution we are building to support small business growth.
Join Markaaz today and become a part of a community built to help you manage your business.
Casey Pontrelli, Content Manager
About the author: Casey Pontrelli is a multi-talented professional with a background in content creation, branding, and social media marketing. Whether writing for a newspaper, eCommerce website, B2B startup, or a marketing agency, she has taken her strong background in journalism and turned her focus to SEO and content marketing. She’s written about everything from boutiques to cars to online lending, but she’s especially passionate about supporting small businesses and giving them equal access to opportunity, which is why she’s a proud member of the Markaaz family. When she’s not writing up a storm or creating eye-catching social media graphics, Casey enjoys hanging out with her two cats, Eddy and Larry, going on long bike rides, and, predictably, reading.
Follow Casey on LinkedIn here.