Business Credit Score: What It Means to Your Business
Every business has both a Business Credit Score and a Business Credit Report. A good (high) business credit score is key to having your company approved for financing and trade credit. Your Business Credit Score ranks the creditworthiness of your business, just the same as your personal score acts as a financial rating.
How Are Business Credit Scores Determined?
Business credit scores are determined by reporting agencies, such as Ansonia Credit Data, with several factors going into the calculation of these figures. Various traits about your company and its financial history determine how credit scores are calculated for your business. Please see below for some factors that may determine your business credit score.
Credit Utilization Ratio
Public Records, which may include bankruptcies, liens, and judgements
Length of Credit History
Some of the above factors are unique to Business Credit Scores while many are similar to the ones used for calculating your personal credit score.
How Are Business Credit Scores Used?
Before a lender or other creditor can approve your business for finance they need to determine how capable your business is of repaying its debts, and this is where your business credit score comes in. If your business has a high Credit Score it indicates to creditors that your business is trustworthy; that it is not a high risk for finance. Lenders will use the business credit report of your company to obtain detailed information about the financial history of your business; with your Business Credit Score serving as a quick-check evaluation.
In addition, a high business credit score may give you access to more credit than you would be able to receive if applying for finance with only your personal credit score.
It is Important to Check Your Business Credit Score
All business owners should review the financial information of their company on a regular basis, and this includes their business credit score. These scores are fluid and can change with time. It is for this reason that creditors will assess your creditworthiness on a regular basis. If you should notice that your business credit score is low, there could well be an error in the credit reports which resulted in an inaccurate calculation. It might also be that your business does not warrant a higher score because it does not have sufficient credit history.
However, if you believe there is an error in your Business Credit Score it is imperative that you contact the credit agency that generated the score in order to have this score checked, and corrected if necessary. If no error has occurred, it is still possible to increase your business credit score over a period of time by making payments on time and lowering the credit utilization ratio for your company .
Regardless of whether you are just starting out in business or you have been in the game for many years, an essential aspect of staying competitive in business is to build a strong credit profile.
Improving Your Business Credit Score
It can be confusing trying to determine how and when business credit scores are used; however, it is actually very simple to keep your score high. Basically, it is the same as taking care of your personal credit.
Make sure your business bills are paid either on time or before their due date;
Maintain your credit utilization at around 25%. It is important that you do not max out your credit lines; and
Open multiple credit accounts; such as trade lines, business credit cards, and loans.
About Business Credit Reports
You are probably aware that you can check your financial history by viewing your personal credit report. Well, the same information can be reviewed for your business, and that is because credit bureaus scour public records and other financial data in order to develop a credit report on your company the moment you start a business. So, when you receive trade credit (also known as a business loan or line of credit), information about your payment history is compiled and turned into a business credit score by a company such as Ansonia Credit Data. Ansonia Credit Data is a premier business credit reporting provider.
One of the most important aspects of being a small business owner is to take the appropriate steps to build your business credit profile. Doing this will assist in creating strong business relationships and open up financial opportunities that will make running and growing your business so much easier.