Apr 23 2021by Stormi Scott

How To Improve Your Business Credit Score

The biggest mistake a company can make in improving their business credit score is assuming that the model they use to improve their consumer credit score applies to business scores. While there are plenty of similarities, there are also ways in which a business's credit score must be handled differently.

What Is A Business Credit Score?

Before you begin addressing what the score is and how to raise it, you should begin by ensuring you have a firm grasp on what exactly a business score is and what it is made up of. As is true of a consumer credit score, it is a number that represents the calculated risk a lender will take on if they approve your business for a loan or line of credit.

The purpose of a business credit score is similar to a consumer credit score, but the specifics are different. The rating agencies for business credit include Experian and Equifax, but they also include rating agencies specific to business credit, such as Dun & Bradstreet. The ranges are very different, too, as a business's credit score starts at 0 with a maximum value of 100.

While most consumer credit bureaus use the same consumer credit bureaus, business lenders often create their own standards. Almost all small business financing lender will use their own unique formula.

One of the most frustrating things about improving your business credit score is that you do not have access to your score unless you pay a fee to one (or all) of the central business credit bureaus.

Why Business Credit Matters

Having a solid business credit score can save your company a significant amount of money. If your company needs to borrow money, you can count on lower interest rates and better overall loan terms the better your credit score is.

However, loans are not the only financial element that can be affected by business credit scores. Many suppliers will look at a score before they offer terms. Not only does a good credit score increase the chance that they will offer favorable terms, but it gives you leverage to negotiate the best possible terms.

If you do not have any business credit score, then lenders and creditors will likely look at your personal credit score. You would generally need an excellent personal credit score to secure small business loans using only your personal credit.

What Is A Good Business Credit Score?

Business credit scores can get as high as 100 and as low as a zero. Small business lending companies generally require a minimum credit score of 75. However, this does not paint the entire picture of what you can expect based on your score.

Remember that local lenders, small business lenders, and other creditors often use their own methods to calculate a business score. You could request your D&B credit score, determine it is 80, and still be turned down for loans. Likewise, you could find that your Experian business credit score is 65 and still be offered financing due to a different system used by the lender you are applying with.

Does this mean that there is no reason to learn your credit score or improve it? No – it simply means that as you improve your credit score and apply for financing, there is no such thing as a "sure thing."

Establishing Business Credit Takes Time

If you are starting at zero, you can expect it to take at least a year, if not longer, to establish and then improve your business credit history, just as you would if you were building personal credit for the first time.

Some of the steps you can take to improve your credit score as quickly as possible include:

• Incorporate or form a UCC
• Open a business bank account
• Get a federal employer identification number
• Get a business phone number listed under your business name
• Register with D&B for a D-U-N-S number

If you want to improve a business credit score for your existing company, start by requesting a company of your report from the major business credit reporting agencies. Requesting a report assure that everything is up to date and accurate. If it is not, review the steps required to contest items with the particular reporting agency.

Apply For Credit Cards To Build Credit

Whether you are establishing or improving your business credit, apply for business credit cards to build credit. Initially, they might require that you use your personal credit to guarantee the card. The hidden benefit of this option is that you can likely take advantage of various benefits and reward programs to help you build your business.

Report Your Business Credit Activity

You should also make sure that you are working with companies that report your activity. Not all business creditors will report to all (or any) of the crediting agencies. Ask the vendors you work with if they report. If they do not, consider working with a company that will report your on-time payments.

Pay Your Bills On Time

This leads us to the primary method of improving your business score: pay your bills early. According to industry experts, if you pay your bills on time, you can end up with a very strong score, but you need to pay your bills early if you want to reach the maximum of 100.

FAQs

Do you have questions about business credit scores, how they are determined, and how you can determine your company's score? Keep reading to get the answers.

How do I Check my business credit score?

If you are the owner of the business, you can request a copy of your credit score by calling or otherwise contacting the business credit bureau and paying a fee. Generally, this fee is not prohibitively high. For example, as of April 2021, the fee for requesting a score from Experian is $39.95.

Who are the leading business credit score reporting agencies?

Dun & Bradstreet, Equifax, and Experian.

What is included on my business credit report?

When you invest in a business credit score, you will get more than just a number – you will also get information on the many factors used to determine your credit score.

Depending on the issuing agency, this could include the information they have regarding your corporate registration, summaries of payments and collections, UCC filings, leasing information, banking information, bankruptcy data, information on judgments against your company, and tax lien filings.

How does my personal credit score affect my score?

If you do not have business credit history, then you can expect that lenders will require you to have excellent personal credit. Likewise, if your personal credit score is low, you can expect that business credit lenders will require a very high score to offer your company financing.

What factors determine my business credit score?

It is important to remember that all business credit reporting agencies have their own methods. Some will weigh the following elements more strongly than others, and some might consider additional factors – or not consider some of the elements on this list. However, the most common factors used to determine business credit scores include:

• The length of time your company has been in business
• Your annual revenue
• Your business assets
• Outstanding debts
• Personal loan and credit history
• Business loan history
• Public records, including UCC filings, liens, and judgments
• Risk based on your business's industry