Business credit scores are important: They reflect the financial reputation of your business and can directly impact your options when it comes to purchasing insurance or obtaining financing. For instance, 20% of “small business loans are denied due to business credit,” according to a report cited by the US Small Business Administration. To help your business avoid such pitfalls, this article goes over the basics of what goes into a business credit score.
Business Credit Score Measures
Like a personal credit score, several factors go into determining a business’s credit score. The three major bureaus that rate business credit scores are Experian, Equifax, and Dun & Bradstreet. Each charges a different price for their business credit score reports.
Dun & Bradstreet focuses on each company’s risk–that is, how likely or unlikely it is to fail to repay a loan. Their report includes both a commercial credit score and a financial stress score.
Equifax uses a measure called “payment index,” which uses data from vendors and creditors. They also provide credit risk scores and a measure of how likely a business is to fail.
As for Experian, the agency looks at factors like outstanding loan balances, payment histories, the presence of liens, how large the business is, and how long it has been around.
Protecting Your Credit Score
It is critical to make sure your business credit score remains in good standing. The same general tips for keeping your personal credit score in good standing also apply to your business credit score: Make your payments on time and don’t take on more debt than your business can handle. Another measure is to examine your business credit score for errors–for example, a payment erroneously listed as late may ding your credit and make it harder to obtain financing.
For more articles on business topics, contact Skybridge Capital Group.