A business credit score is a measurement of your company’s ability to manage and borrow money. It works just like a personal credit score to define your eligibility for loans, credit cards, and external funding opportunities.
Investors, traders, lenders, and financial institutions often use business credit scores to judge the current position and future economic capacity of your company. That’s why, as a sole proprietor, it’s important for you to know, maintain, and perhaps improve your credit score so more business doors can open for you.
Learn about what a business credit score is, how it benefits your business, how to check it online, and how to improve it for better market positioning.
- Your business score is calculated using information about your payment history, existing debts, assets, and other business-related factors.
- A business credit score can play a role in whether lenders approve you for funding.
- You can check your business credit score using a variety of free and paid services.
- On-time debt payments and correcting any inaccurate information on your business credit report may be able to increase your credit score.
What Is Your Business Credit Score?
A business credit score is a measure of the financial health of your business. It’s a number influenced by your time in business, revenue, assets, past transactions, debts, details of your current business activities, and, in some cases, the type of industry you’re in.
|Business Credit Score||Personal Credit Score|
|How the score is generated||Based on your business transactions, which typically includes business loans, investments, funding received, etc.||Measured by your payment history, debt relative to your credit limits, credit age, recent inquiries, and credit types.|
|When it’s used||Used for business loans and analyzing the stability of your company for investment decisions. Can be obtained without your consent.||Lenders often use personal credit scores to make decisions about mortgages, personal loans, auto loans, and credit cards. Usually, the lender has to get your consent to access your score.|
|Score range||Typically measured between one and 100.||Typically measured between 300 and 850.|
|Availability||Business credit scores are available to the public.||Personal credit scores are mostly private.|
Lenders and investors want to minimize the risk of losing their money, so they prefer to lend to businesses that have a positive credit history, which includes paying off debts on time. For example, small businesses with minimal missed or late payments and a stable financial history are given a higher credit score, signifying that it’s a safe investment option.
How To Check Your Business Credit Score
Today, a variety of business and financial organizations offer free and paid tools for checking your business credit score.
Check Your Business Credit Score Online With Free Tools
Dun & Bradstreet (D&B) CreditSignal offers a free tool for checking, monitoring, and learning more about changes to your business credit score. You can sign up for email alerts to stay updated on any changes to your credit score. The tool currently tracks the following credit scores and metrics: D&B Paydex, Delinquency Predictor Score, Financial Stress Score, and Supplier Evaluation Risk Rating.
D&B CreditSignal gives you access to your D&B scores for 14 days. After that, it doesn’t give you score access but does update you when your score changes.
Business-focused site Nav provides free credit reports that offer a summary of the Experian and Equifax business credit reports. You also get a grade for each score, plus some tools to help you improve your current business credit score.
Check Your Business Credit Score Online With Paid Tools
Experian’s business credit report is a paid service offering a pair of one-time credit reports for $39.95 and $49.95 and two yearly options for $189 and $1,495. The tiers vary by the type of information and the number of ongoing monitoring services they provide.
The Equifax business credit report is another multifunctional credit report offering a Risk Score that judges the likelihood that your business will be more than 90 days late on a debt payment.
How Do You Improve Your Business Credit Score?
If you are not happy with your business credit score, there are a few ways to improve it.
Pay Your Business Bills on Time
One of the most obvious ways to improve your business credit score is to pay your equated monthly installments (EMIs) and loan payments on time. This is a key element of determining your credit score: The faster you pay, the higher your score goes.
Late payments can lower your credit score.
Remove Inaccurate Information From Your Credit Reports
Some canceled payments or disputed issues can make their way into your credit reports, lowering your overall score. Make sure to watch your credit history and make note of any information that doesn’t belong on your report.
Monitor Changes to Your Business Credit Score
Businesses that regularly monitor changes to their credit scores are able to identify potential issues faster and deal with problems that could affect the company’s credit score. If you check your score only when you need funding, you may not be aware of significant negative changes that could hinder the funding process and take a long time to repair.
Work With Vendors and Suppliers That Report Your Payments
Paying your vendors and suppliers on time whenever a bill is due will help you boost your credit score, but only if those companies report your payments to business credit bureaus.
Frequently Asked Questions (FAQs)
What is a good business score?
A business credit score of 80 or higher is typically considered an “excellent” business credit score. A business credit score can range from zero to 100, with 100 being the highest score you can get. A good score can help you obtain low-rate funding from programs such as Small Business Administration loans.
How can you check your business score for free?
Several reputable companies offer free access to your business credit score, including Dun & Bradstreet and Nav. The number of features and level of access you get may vary from company to company.
What credit score is needed for a business loan?
Most lenders require a credit score of 75 or above to approve a business loan. However, your credit score is just one part of a lender’s approval process. Other factors that play into a lender’s decision include revenue, time in business, and your company’s debt levels.