Your business credit score shows your business creditworthiness.
A good business credit score helps you get business loans and business insurance on cheaper terms.
A business credit score is an asset for your business. Your business’s first impression in the credit market depends on your business credit score.
We will help you understand what is a good credit score, how it helps you, and how you can achieve a good business score with this article.
What Is A Business Credit Score?
A business credit score shows if you pay your business bills on time and if lending you money is safe.
A business credit score is different from a personal credit score for an LLC or an organization. However, for sole proprietors, their personal credit score works as their business credit score.
The credit reporting agencies for the business credit score are different. These are four business credit reporting agencies and their business credit scores.
- Dun & Bradstreet PAYDEX
- Experian Intelliscore Plus
- Equifax Business Credit Score
- FICO SBSS
What is a Good Business Credit Score?
A good business credit score depends on the type of credit score scale you are looking at.
Lenders may choose a different business credit score when dealing with you. That means you will need to build and keep a good business credit score on all four score scales.
Factors determining your business credit score are similar for all four business credit scores.
If you have achieved a good business credit score on one scale and there are no missing trade references on your business credit report, your score will be similar on all scales.
See what the business credit scores from each credit reporting agency mean for your business.
Experian Intelliscore Plus
Experian offers business credit scores as well as personal credit scores.
Experian Inelliscore Plus gives business credit scores in the range of 1-100; a higher score means better credit.
Aim to achieve at least 76 on the Experian Intelliscore Plus scale to get a good response from lenders.
Equifax Business Credit Score
Equifax calculates two business credit scores:
- Payment index score (1-100)
- Business Credit Risk Score (101- 992)
- Business Failure Score (1,000 – 1,610)
A desirable business credit score in the Equifax Business Failure Risk Score range is above 570.
What is a good Equifax business credit score?
There is a range between 1 and 100, with 1 being the worst and 100 being the best. The number is based on the payment history of your business. You can earn a 90-100 score by paying your bills on time.
FICO SBSS Business Credit Score combines Experian, Equifax, and Dun & Bradstreet business credit scores and gives a new, unique score.
FICO SBSS credit score range is 0-300. As usual, a higher score is a better score.
You will need a FICO SBSS score over 155 to be considered for most business loans.
How Good Business Credit Score Helps You?
Protects Personal Finance
Building a business credit score protects your personal credit score.
When you run a business, you will get two credit reports; a business credit report and a personal credit report.
All business payments, debts, and credits go to the business credit report whereas personal expenses go to the personal credit report.
Your personal credit score won’t be affected by your business financial woes.
Easier Approval for New Loans
When you have got good business credit, you will likely be approved for new loans easily.
A low business credit score shows that it is risky to lend to your business. The creditors will hesitate in giving your business a loan with bad credit.
However, when you can show responsible behavior with debt with a good business credit score, you will easily qualify for new loans.
Better Loan Terms
A good credit score shows less risk for the lender. Most often, they will be willing to lend to you over lower interest rates.
You can negotiate lower interest or ask for a bigger credit limit.
A lower interest rate will save you money in interest payments and a bigger credit limit gives you more financial resources.
Better Credit Terms with Suppliers
Business suppliers will be comfortable working with a good business credit score.
As a high credit score shows less risk, you will be able to buy goods and services on better credit terms.
For example, many suppliers will offer you credit on net 30 payment terms, net 60, or net 90 terms when you can show financially responsible behavior with a high credit score.
How Can you Improve your Business Credit Scores?
Building and maintaining a good business credit score is easy when you do it strategically.
You can improve your business credit score with these simple steps.
Pay Bills on Time
Paying bills on time is the long and short of your business credit score.
When you make payments online, it shows you are financially responsible and improves your credit score.
For instance, your business has a credit or you make a purchase on a credit like net 30 payment terms or net 60 credit terms.
When you make a payment before your credit term ends, it raises your business credit score. However, if you are late for even a day or two, it will adversely affect your business credit score.
A trick to get ahead on the Dun & Bradstreet PAYDEX score is to pay 30 days before the end of the credit term.
For example, when you can make a payment instantly, take credit on net 30 terms or net 60 terms and make payment on the very next day. Doing this a few times will shoot up your business credit score.
Reduce Credit Utilization Ratio
The credit utilization ratio is the amount of credit you use when compared to the total credit available to you.
First, calculate how much credit is available to you and how much of it you use. Then, divide the amount of credit you use by the total available credit, and multiply the answer by 100. This is your credit utilization ratio.
Aim for keeping credit utilization ratio under 30%. However, don’t let your credit accounts sit idle.
Use available business credit up to 30% of the total limit. Make sure that you pay debt and credit before time.
If you have a business credit card, be punctual with the payments. Pay in full, don’t transfer credit, and make credit card bill payments twice a month when you can.
Pro Tip: Make a good use of credit card and build business credit by following this comprehensive guide on how to build credit with a credit card.
Keep Business Lines of Credit Active
Your business credit lines or trade references with lenders, vendors, and suppliers help you build business credit.
The transactions you make as a business are counted towards trade experiences. A high number of good trade experiences results in a high credit score.
Business credit lines give you access to important business resources and finances.
Maintain Personal Credit Score
Though a business credit score is not directly attached to your personal credit score, a good personal credit score is helpful nonetheless.
A personal credit score is especially important for sole proprietors and small business owners.
Lenders may also look into your personal credit score before lending your business some credit. A good personal credit score can qualify you for a loan when you haven’t yet built good business credit.
Check Business Credit Reports Regularly
A business credit report shows your trade references, business credit, business tradelines, and other payments your business makes.
Some suppliers and vendors may not report to credit reporting agencies, which causes missing data on your business credit report and a lower credit score.
Watch your business credit report, spot any missing data, unreported payments, or inaccuracies, and report them to the credit reporting agency.
You build a good business credit score bit by bit, don’t let the missing data damage your efforts.
Looking to Build your Business Credit Fast?
If you are a small business and looking to build your business credit, check out this guide on how to build your business credit fast approved by credit experts.