Now that you’re running your own business, you deserve credit for all the great work that you’re doing. When you need a loan or insurance policy, or if you’re taking on a new vendor or business partner, will others agree that you deserve credit – financially?
Your business credit score succinctly expresses how well you’re handling your company’s financial obligations. Business credit bureaus Dun & Bradstreet (D&B), Equifax Business, and Experian Business collect information about your payment history, outstanding balances, and other financial history milestones to calculate your creditworthiness on a scale of 0-100. Although each bureau’s algorithm is slightly different, a score of 75 or higher is considered excellent.
Having an excellent credit score will make it easier to get approved for – and achieve favorable terms on – a small business loan, a line of credit, an insurance policy, new vendor pricing, and more. With a stellar business credit score, lenders are less likely to require that you personally guarantee your business debts. This protects your personal credit rating and reduces your risk of personal liability.
How, When, and Why to Keep Track of Your Business Credit Score
While you can get your personal credit score and report once a year at no cost, you will have to pay a fee in order to obtain your business score and report.
Additionally, business credit scores are considered public information, so anyone can order a copy of your data as long as they pay the fee. This is another reason why your business credit score is so important.
Even the most reputable financial institutions make mistakes, so you need to check your company’s score at least once a year. Review your report carefully to check for any errors, and if you discover any misinformation, contact the bureau directly. You’ll need to provide them with accurate documentation in order to request an adjustment to your report.
If you discover that your business credit score is less-than-ideal, don’t panic. There are plenty of things you can do to improve. Start with these four tips:
1. Identify as a Business.
Incorporate or form an LLC with a federal employer identification number. This will keep your business finances and credit separate from your personal data that is based on your Social Security number. Next, open a business bank account and credit card to cement the wall between your business and personal financial information.
2. Make Prompt, or Even Early, Payments.
Now that you have a business bank account and credit card, it’s crucial that you make all payments in full and on time. Not only will this make your bank and vendors happy – it will also result in an upwardly mobile business credit score!
In fact, for your Dun & Bradstreet business credit score, take it a step further (if possible) by paying invoices early – that’s the only way to earn D&B’s highest credit ranking.
3. Use Your Credit Utilization Ratio to Your Advantage.
A key piece of data in the game of business is your credit utilization ratio, which is the ratio of your current debts to your available credit (total debt divided by credit limit). Aim to keep this number as low as possible; a lower ratio indicates that you aren’t using very much of the credit you’ve been offered, which signals to the powers-that-be that you’re using your money wisely.
4. Shout it from the Rooftops!
When you have a great credit score, you should be loud and proud. Ask your vendors and creditors to share your payment data with all business credit bureaus as often as they can. The more good news the bureaus have about your payment history, the better your score will become.
Need Help with Your Business Credit Score? Ask the Pros.
Whether your business score is poor or simply needs a slight boost to make it into the excellent range, JADDE Financial Solutions can position your business for optimal fiscal success. Reach out to us at 732-625-2734.