How to check your business credit score? This question is crucial for any entrepreneur keen on growing their business. A business credit score is much like a personal credit score but focuses on your company's financial health instead of your personal finances.
It measures the creditworthiness of your business, impacting your ability to secure financing, negotiate terms with suppliers, and even attract new customers.
Clay / Unsplash / Your business credit score a realistic measurement of how likely your business is to pay debts on time.
What is a Business Credit Score?
A business credit score evaluates the likelihood that your business will repay debts on time. This score is calculated using several factors including your company's payment history, the age of your business, credit utilization, and public records such as bankruptcies or liens. Typically, scores range from 0 to 100, with higher scores indicating greater creditworthiness.
Freepik / Unlike personal credit scores, which are standardized by major credit bureaus in the U.S. like Experian, Equifax, and TransUnion, business credit scores can vary significantly between different agencies.
The main bureaus for business credit include Dun & Bradstreet, Experian Business, and Equifax Business.
How Does a Business Credit Score Work?
To grasp how to check your business credit score effectively, it is essential to understand how it is calculated. The process starts when a business entity like yours engages in activities that trigger financial reporting, such as taking on a new credit line, paying back a loan, or settling bills with suppliers.
These transactions are reported to credit agencies which then use this information to update your score.
Here are the key elements that influence your score include:
- Payment History: Just as with personal credit, timely payments improve your score, while late payments can cause it to drop.
- Credit Utilization Ratio: This is the ratio of your current credit debt to your available credit limit. Lower ratios are viewed favorably.
- Company Age: Older businesses generally have more established credit histories, which can lead to higher scores.
- Public Records: Bankruptcies, liens, and judgments against your business can negatively impact your score.
What Affects Your Business Credit Score?
Understanding what affects your business credit score is key to managing it effectively. One of the most direct influences is how you manage your business finances, particularly how promptly you pay your bills. Plus, the financial stability of your industry can play a role, as can the amount of debt you carry compared to your credit limits.
Blake / Unsplash / How you manage your finances goes a long way in determining your business credit score.
However, it is also important to note that errors in your credit report can negatively affect your score. Regular monitoring of your business credit report can help you spot and rectify these inaccuracies before they impact your financial options.
How to Check Business Credit Score
To check your business credit score, you'll first need to identify which bureau you want to obtain your report from. Dun & Bradstreet, Experian Business, and Equifax Business all offer different insights and scoring models. So, it would be beneficial to check your score with more than one agency to get a complete picture.
Here is how to check your business credit score step-by-step:
- Choose a Credit Bureau: Decide which of the business credit bureaus you want to use based on the specifics of what they report and how they calculate scores.
- Request Your Credit Report: You can request a free copy of your business credit report from some bureaus once a year, similar to personal credit reports. Others may require a fee.
- Review Your Details: Check for any inaccuracies in your report, such as wrong payment histories or outdated company information, and dispute any errors you find.
Alongside the score, you will receive details on factors affecting it. Use this information to improve your business's financial practices.