What to Look for on Your Business Credit Report
A business line of credit is important for many reasons, the biggest of which is that it can allow businesses to grow even in times of restricted cash flow. Unfortunately, many small business owners do not take the necessary time to fully understand their business credit, what factors may affect it and how they can improve it, but they should. If you own a business of any size, and if you haven’t taken the time to learn more about your business’s credit, here is what you need to know, in brief:
A Good Credit Score is Between 80 and 100
Unlike your personal credit score, which should hover between 650 and 850 to be considered by any lenders, your credit score for your business should be between 80 and 100. If it’s at 70, that’s not bad, but there is still room for improvement, but if it’s below 70, you should begin taking active measures to improve it.
Your Score is Not Private
Because you are a business that provides goods or services to the public, most information about your company is free to access by anyone who should want it, including your business credit score. Lenders may want to check out your score to see if you’re trustworthy, vendors may want to run a brief credit check before they allow you to place a larger order and even customers may want to check it out before agreeing to do business with you. For these reasons, it’s imperative that your score indicates that you’re trustworthy and reliable.
There is No Standardization
Unlike the consumer credit bureaus, the bureaus that calculate credit scores for businesses don’t use a standard formula. This means that your score may vary depending on which company is reporting it, which may be frustrating for you as you try to improve and maintain your score.
Your Personal Credit Score May Matter
Depending on the size of your business and how long you’ve been in business, lenders may still want to know what your personal credit score is as well as what your business credit score is. For this reason, it is best to keep both scores as high as possible, otherwise you may risk losing funding for your business because of a past due credit card in your name.
Owning a business is a lot of work, and you may discover that every day comes with something new you’re supposed to be doing. Maintaining your business’s credit score is one of those things. However, by putting in the time to understand how business scores are calculated and what you can do to improve your business’s score, you can give yourself a leg up and make business ownership just a little bit easier.