Guest Post by Elizabeth Aldrich
If you don’t know your business credit score, you’re not alone. A survey conducted by Nav shows that almost half of small business owners don’t even know that business credit exists.
That oversight doesn’t mean that business credit scores aren’t important. A good business credit score will get you the best business loans and lines of credit, while a bad one will bar you from borrowing money at all. Given that a lack of growth and cash flow were revealed as the main obstacles facing small business owners in the Nav survey, it’s clear that access to low-cost funding options a necessity for business owners.
While your personal credit score looks at your relationship with credit, your business credit score looks at your business’s relationship with credit. A number of credit reporting agencies calculate business credit scores, including Equifax, Experian, and Dun & Bradstreet, and each has its own scoring method. Your business credit score can range from 0 to 100, although if you’re just starting out and have never used a business loan or business credit card, you might not even have a business credit score.
Many business owners don’t think they need to pay attention to their business credit score. However, even if you don’t plan to borrow money for your business right now, you should still know your business credit score. Here’s why:
Each credit scoring agency calculates your score differently, but the following factors are typically considered:
Credit accounts under your business name, such as business loans or business credit cards, are a main determining factor in your business credit score. Credit scoring agencies will look at the following factors:
If you fail to pay your business’s bills (rent, electricity, etc.) on time, those missed payments can be reported to the agencies that determine your business credit score. Furthermore, unpaid accounts can be sent to collections if left overdue for a long time, at which point your business credit score is likely to take a severe hit.
Any judgments made against your business in court, liens, or bankruptcies will show up on your public records. These are also used to calculate your business credit score.
The following factors can also influence your business credit score:
If you don’t know how to check your business credit score, it’s fairly easy. You’ll want to get your score from each of the three main business credit scoring agencies by contacting them at the links listed below.
Knowing your business credit score helps your business plan for the future. Once you have your business credit report in hand, you can take several steps to improve your business credit score, from opening a business credit card to decreasing your current debt levels. Don’t let a bad or nonexistent credit score get in the way of your business’s growth.
Elizabeth Aldrich is a freelance writer covering personal finance, business, and travel. Her writing has appeared in The Motley Fool, Business Insider, Yahoo! Finance, LendingTree, Student Loan Hero, FOX Business, and more.
August 17th, 2022
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