Everyone knows — or should at least be keeping tabs on — their personal credit score. However, business owners have another figure to worry about too: the credit score for their business. That’s why building solid business credit is such a fundamental tactic in shaping the long-term direction of your business.
Your business credit score is a key metric used by banks and other investors when deciding whether you pose a worthwhile financial risk. If you have a poor score, you could miss out on critical business loans, lower interest rates, higher credit limits and more favorable repayment terms.
Essentially, by not considering your business credit report on an ongoing basis, you could wind up sabotaging your company’s financial health and robbing yourself of opportunities to build your company’s future. But how can you influence your credit score without first understanding how it works and what you can do to maintain it? Let’s start with some details on how you can find your business credit score, and then we’ll move into more specifics about how your score is determined.
How to Find Out Your Business Credit Score
Your credit score can vary depending on how your credit data is reflected across the big three credit reporting companies. While this figure may be somewhat nebulous, its importance carries a ton of weight in your business interactions. To that end, the Consumer Finance Protection Bureau offers some tips on how to identify your score.
- Check your bank statements: The first place to turn to for answers may simply be your bank. Although this practice tends to be more common with personal accounts than those tied to specific businesses, some companies offer credit score updates with each monthly statement. So before you exhaust more intensive means, it’s worth taking the time to review your credit card and/or loan statements to see if your score is already waiting for you.
- Turn to a credit score service: This is often the first option folks think of when they consider acquiring their updated credit score. Offers may run the gamut, from a free credit score to a subscription service with all kinds of perks. Although some of these options may be useful for your business, proceed with caution — you don’t want to become committed to one of these companies without properly understanding the terms and conditions involved. Here are a few credit score services you might wish to consider:
- Credit.net: For new users, this site offers a free seven-day trial along with seven free business credit reports before charges kick in. Credit.net is attractive for business owners who only need a credit report, because this site does not require a credit card upfront (so your paid account won’t sneak up on you if you’d prefer to cancel it). If you decide to stay active, there are a number of packages to choose from.
- CreditSafe.com: This site also offers a free business credit report to entice new users before moving into a subscription model. The credit monitoring capabilities at CreditSafe are impressive — listing your risk rating, payment trends and (of course) any changes in your credit score. But if all you’re interested in is your business credit score, this might be a good option to satisfy that need without incurring additional costs.
- Scorely: Unlike the first two, this is more of a business credit reporting bureau than a pure credit score service. However, for the purposes of retrieving your business credit score, the site will more than meet expectations, especially since its mission is to distill data into easily digestible reports. Scorely aims to provide you with the tools to take the reins of your credit rating, whether you opt for a full subscription or just run with the free report it provides.
- Buy your credit score: It might not be the most alluring option in the world, but simply purchasing your business credit score is also a viable choice. Each of the three major business credit bureaus — Dun & Bradstreet, Equifax and Experian — offer packages that include your credit report amid other services for a nominal one-time fee. Even if you don’t need any additional features, it’s in your best interest to check on your business credit score at least once per year.
What Does Your Business Credit Score Mean?
Now that you have your business credit score, you need the proper context to guide you in understanding and improving upon it. The closer your score is to the maximum of 100, the more impressive a figure it is. As we’ve mentioned, the precise figure can vary depending on the agency you turn to.
However, the principles that play into calculating your business credit score remain largely universal. For instance, your first order of business should be to delve into a deep review of your credit history and suss out any inaccuracies that may be impeding your score. In many cases, a simple update will greatly improve your credit score.
Beyond that, your priority should be consistency. Since your credit score is used as an indication of your financial reliability, your ability to pay bills on time (or even settle them up earlier than expected) can go a long way toward boosting your business credit score. Be careful not to miss a single payment, as your score (and your creditor relationship) will inevitably take a hit. Close management of your accounts payable demonstrates a level of trust and professionalism that speaks volumes about how you do business.
In addition, keeping your level of debt under control in the short term will bolster your chances of success down the line. Opt for smaller debt balances early on so you can ensure swift repayment and establish a positive pattern of behavior for your business. Of course, this also includes staying well within your credit limits. You never want to max out a credit card account, as this is a negative sign on your business credit report. After all, the last thing you want is for potential creditors to think you’re financially in over your head.
Another reason your business credit score might be hurting is if you have faced any kind of legal action or other judgments that reflect poorly on your standing. By wisely leveraging your debt and staying on a scheduled payment plan, you should be able to create a scenario in which your business credit is able to thrive. We also recommend that you incorporate your business as a separate legal entity to prevent any confusion with your personal credit score. Such a move only emphasizes the protection of your business’ financial health.
Ultimately, you can only do so much when it comes to managing your business credit score. The credit agencies that calculate these figures have their own set of criteria that they consider when determining where your business stands. What you can do is implement smart business practices and stay on top of your finances. This diligence will give you the opportunity to take your business credit score to new heights in no time.
Do you have something to add to our discussion about your business credit score? Tell us your story or just share your thoughts, comments or questions with us on Twitter over @Revenued_com
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