However, it’s worth keeping track of your company’s credit scores, especially if you’re considering applying for a business loan in the near future. Business credit reference agencies collect information about your company’s financial history and may use it to compile an assessment of your level of risk to lenders; this serves as your business credit score. If you’re familiar with personal credit scores, you’ll recognize business credit scores as a similar concept.
Your personal credit is your personal story, dating back to the first time you took out a line of credit in some way, whether it’s your first credit card, mortgage, student loans, car payments, or something else. Your Social Security number is linked to your personal credit score and your credit transactions are compiled by the three credit bureaus, who then calculate it to determine your credit score. A good business credit score is usually at the upper end of the range for two of the three major reporting agencies. Business credit scores typically range from 1 to 100, with 100 being the best possible score. That’s different from personal credit scores, which are calculated on a scale. As with your personal credit score, lenders are more likely to approve business borrowers with a credit score in a certain range, depending on their appetite risk.
The three business credit bureaus, Equifax, Experian and Dun & Bradstreet, generate business credit scores from the above information, as does FICO. Unlike consumer credit scores, which use standard methods and algorithms to qualify, each of the business credit bureaus uses completely different methods to score business credit risk, with different scoring ranges. As with personal scores, paying your bills on time is one of the most important scoring factors. However, unlike personal credit scores, some business credit scores reward you for paying your bills upfront.
Your business credit report, like your personal credit report, outlines how your company manages its finances and financial obligations. It provides information about your creditworthiness and your ability to repay any credit extensions. The data in the report can make or break your company’s ability to raise funds. Experian, Equifax, and Dun & Bradstreet are the three credit bureaus that compile business credit reports. Just as you would look at your personal credit report to check your financial history, the same information can be reviewed for your business. This is because the moment you start a business, credit bureaus begin to develop a business credit report about your business.
A company’s credit report begins as soon as it is included and receives a federal tax identification number. Unlike consumer credit reports, business credit reports are public information and accessible to everyone. Credit reporting companies would research individuals and businesses, track their payment history, and sell access to credit reports. Fast forward to today, and international credit bureaus are using more advanced technology to gather information, organize data, and sell credit reports around the world.
Experian’s business credit reports include a rating called Intelliscore Plus to create a corporate credit profile. Small business credit scores are similar to personal credit scores, except they are company-specific ratings. A small business credit score is important for a business owner and for businesses that interact with that small business, such as vendors and suppliers. Unlike personal credit scores, business credit scores are publicly available. Anyone can go to one of the reporting agencies and look up your business score, although they may have to pay for it.
The information collected, analyzed, and quantified in your business credit reports is used by creditors, leaders, suppliers, and anyone else you currently do or may do business with. It can even be used by your competitors who can provide a copy of their business credit reports when they are competing for an offer. If they know that their business credit tenant credit checks is less than stellar at the same time, it is an advantage for them to shed light on their excellent business credit scores. Scores and indices are used to predict the financial stability and reliability of a company. Creditors will want to see healthy scores and a record of good repayment habits before offering a line of credit, loan or repayment terms.