Business Credit Score

Business Credit

Build your score, bring in the Benjamins.

Get a business loan now.

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Does your business even have a credit score?

That depends. Have you opened a business credit card or taken out a business loan? If so, your company likely has a credit score. Business credit scores are a lot like personal credit scores in that they measure the creditworthiness of an entity - which, in this case, is your business.

And it’s important to keep your business credit in tip-top shape because potential lenders, vendors, customers, and even your neighbor can see it. That’s right, unlike a personal credit score, your business credit score is available to the public - and it often can be the deciding factor for whether a lender gives you financing.

How your business credit score is calculated

The major providers of business credit scores – Experian, Equifax, and Dun & Bradstreet – each have their own ways of assigning a score, but there are a few common indicators they use:

  • Years in business
  • Credit lines applied for in last 9 months
  • Credit lines opened in last 6 months
  • Past 12 months of payment history
  • Number of late payments

Understanding these indicators is the first step to understanding and improving your business credit.

Business Credit

Cathy's Coffee Shop

Years in Business15
Credit Cards6
Payment History99%
Coffee Shop Owner Credit Score Meter

High scores bring big rewards

The #1 reason that traditional lenders reject most small business owners is bad credit. Building a strong business credit score brings you better rates and terms on small business loans and financing. And that’s only the beginning of the benefits.

If your business is ever hit with hard times, a strong business credit score provides a safety net by making it easy to take out emergency loans or lines of credit. On top of that, vendors and suppliers are more likely to do business with you when your credit is solid.

The #1 reason that traditional lenders reject most small business owners is bad credit.

Building better credit

Here are a few steps to building better credit:

  1. Make sure your business is a separate legal entity from you

    Your business must either be a corporation or a limited liability company (LLC) in order for it to be assigned a business credit score.

    You don’t technically have an official business if you freelance or have some sort of side gig. It’s okay to declare your earnings as extra income if you’re not doing a lot of work on the side. But if you’re freelancing in a full-time capacity, it’s a good idea to separate your business from yourself to protect your personal assets from business liabilities. Applying for a single member LLC or an S-corp are both smart ways to protect your personal assets.

  2. Open a bank account for your business

    This will help ensure that your business and personal finances are separated – which is the easiest way to protect your personal assets from any liabilities you may incur as a business. If someone decides to sue your business, for example, only your business assets will be affected as long as you have separated your personal and business finances.

    Once you have a separate account, use it for only business expenses. Be careful not to commingle business funds with personal expenditures. In other words, don’t buy your grandson’s birthday gift with a business credit card because it can negate the benefits of separating expenses if you’re ever in a legal dispute.

  3. Make timely payments

    Above all else, keeping up with your payments is key to building better credit. It’s the cornerstone of credit data, and a surefire indicator of creditworthiness. These days there are a lot of tools you can leverage to stay up-to-date with your payments. Here’s what you can do:

    • Sign up for auto-pay. Most recurring bills offer the option to have the owed amount automatically deducted from a bank account of your choice.
    • Utilize bill-pay reminders. You can put your bills into the calendar on your phone or you utilize reminders from softwares like Microsoft Money or Quicken.
    • Schedule a bill-paying time. Carve out a regular time slot on your schedule every month to formally sit down and take care of all your bills.

    Utilizing the methods and tools mentioned above will help you automate the bill-pay process and will put you on the fast track to building good credit.

  4. Open a business credit card

    Once you’ve mastered making payments on time, you’re ready to take your business credit into your own hands. Getting a business credit card allows you to switch common cash purchases over to card. By putting some of your expenses on a card and paying off the debt with money you already have, your credit will start to build at a faster pace.

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Fixing your credit

You may find yourself staring at a low credit score not knowing what to do. Not to worry, any credit score can be fixed. Here’s how:

First, you’ll want to make sure your information is current with the three major credit bureaus, Experian, Equifax, and Dun & Bradstreet:

  • Check your business credit score with each of the three major bureaus
  • Look for mistakes like payments that haven’t gone through or were never reported
  • Contact the credit bureau with evidence of needed corrections

If your vendors haven’t been reporting their payments properly, you can either contact a credit bureau with evidence of your payments or contact your vendor and request that they update their reports with the bureau.

Second, take care of outstanding debts and start making all your payments on time. This can be a little painful if you’ve fallen behind, but it’s better to get caught up than to spiral deeper into debt.

Finally, taking out equipment loans, opening business lines of credit, and using business credit cards are all great ways to boost your credit score. They requires smart financial planning on your part, but if you can manage your payments, your credit score will rise faster than a hot air balloon on a cold day.

Are you ready to give your business credit the boost it needs?

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