Business credit scores are essential to a business. Much like personal credit scores are essential for an individual’s personal finance. Every business has a line of credit or open credit, which is linked to a credit score. For businesses, your credit score is what allows you to gain access to, business financing. If you are a business owner, raising your business credit score should be one of your top priorities. If you are thinking “How to Raise My Credit Score” you have come to the right place. We have an extensive background in helping businesses build their credit scores.
What Is Business Credit Score
Every business has a business credit score. These scores are a rating of how credit-worthy your company is. There are business credit reports, very similar to how personal credit reports work. A higher business credit score can lead to better business financing and even lower insurance premiums or interest rates. Like personal credit scores, business credit scores take time to build and grow. There are no instant results when it comes to building your credit score.
What is the #1 Myth about business credit scores? It is that business credit scores and personal credit scores are reported on the same report.
How Business Credit Scores Are Calculated and Reported
Both business and personal credit scores are reported through “credit bureaus”. However, there are different credit bureaus for business credit than personal credit. The US has three business credit bureaus: Dun & Bradstreet, Equifax, and Experian. These credit reporting agencies have different criteria for calculating a business score. They are calculated differently than personal credit scores.
- Credit Scores – Business credit scores range from 0 to 100. In contrast, personal credit scores range from 300 to 850.
- Information Collection – Each bureau has its own method of collecting information on each bureau. Bureau’s collect data on sources such as banks, business credit card issuers, vendors, and trade associations.
- Access – Checking your consumer credit score is free for everyone. However, businesses do have to pay a fee to access their business credit report and score.
Why Your Business Credit Score Is Important
Much like a personal credit score, business credit scores gauge the “creditworthiness” of the business. Your business credit score matters when you start looking into financing options. Many businesses, especially new businesses, need capital to fund their business. Your business credit score will determine what type of funding you may be eligible for.
- Lenders and suppliers look at your business credit score before they present terms to you. A high credit score leads to more favorable terms for you.
- Banks establish lines of credit based on both business credit scores and FICO credit scores.
- A good business credit score will help you obtain business financing and loans faster. If you are in need of funding fast, this will be invaluable.
How To Raise My Credit Score
Business credit scores play an essential role in the financial health of your business. Credit bureaus calculate business credit scores in a multitude of ways. In turn, there are several steps you can take to raise a business credit score. If you have a low business credit score, you have the power to turn your score around.
Check Your Business Credit Score and Credit Report
Believe it or not, there are business owners who do not check their credit scores, much less their credit reports. As a business, get into the habit of checking your credit report on a regular basis. It is essential for your companies financial well-being to check your credit score on a regular basis. Through monitoring your business credit report, you could catch any possible errors or inaccuracies. If you do have an inaccuracy on your business credit report, you can have it disputed.
Correct Mistakes on Your Business Credit Report
Even a small mistake on your business credit report can be detrimental. Small errors can build up over time and lead your business credit score to plummet. When there is an error on your credit report, it must be corrected as soon as possible.
Monitor Your Businesses Public Records
Business credit reports will include any public records that are on file. These public records are filed under your business name. They include any bankruptcies, judgments, and liens. If there are any rulings against you, it will negatively impact both your company’s image and credit score.
Pay Your Bills On Time
One of the easiest ways to increase your business credit score is to make sure you are paying your bills on time. If you are not paying your bills on time, your credit score will suffer. Excessive debt will put your credit score at risk.
Lower Your Credit Utilization Ratio
Credit Bureaus will be looking at your utilization ratio to determine your credit score. Utilization of credit is determined by the amount of credit available vs the amount used. Ideally, you should be keeping this ratio under 15%. Here are a few things that you can do to keep your utilization ratio down:
- Keep your credit card balance paid off
- Open a new line of credit
- Increase your credit limit
- Decrease credit card spending
Keep Your Credit Accounts Open
Keeping your credit account open will increase your business credit score. Lenders and creditors like to see that you can manage a credit account. Additionally, they want to see an accounts’ longevity. Closing a credit card will lower the length of your credit history. Your credit history is a determining factor in your business credit score.
The Bottom Line
Building your business credit score will take time and it is not an overnight process. If you haven’t been checking your business credit score or report, now is the time to start. Establishing good business credit will help you down the road – in case you need a loan, safety net, or potential savings. The pandemic has shown us that anything can happen to your business. It is better to be over-prepared.
We Can Help You Build or Repair Your Credit Score
KAB Credit Services has the knowledge you need to decide the right loan for you. That might mean the credit line will have low interests and long-term loans. We can even get you funding in seventy-two hours or less. What are you waiting for? Get your started today! Call us today at (321) 267-2111 or send us a message.