How can I improve a business credit score?
How do I think about improving by business credit score?
A good business credit score can have a significant influence on the success of your company. It shows lenders, suppliers, and vendors that your business is reliable when it comes to payments. And can help secure better borrowing terms.
The three major credit bureaus – Dun & Bradstreet, Experian and Equifax – consider various factors when calculating your score. These include aspects such as past payment performance, current debts, and the ratio of your current credit balance to your overall credit limit (your credit utilization ratio). The bureaus also take public records into account, along with other company details like its size, age, and industry.
Why is it important to have a good business credit score?
A company’s business credit score provides a snapshot of its financial health and creditworthiness. A higher score is an indication that it is responsible with money management. It represents a lower financial risk to lenders, vendors, and other creditors.
A company with a good credit score is more likely to secure financing. Insufficient and delayed financing is the second most common reason for the failure of small businesses, according to the Small Business Administration. Being able to access more funding options can be vital for a company’s growth and success.
Lenders will also extend more competitive borrowing terms to businesses with good credit scores, including higher credit limits and lower interest rates. A poor score can be a barrier to borrowing, with lenders rejecting credit applications from businesses that fail to meet their threshold. Business credit scores are not confidential. Anyone can view them, including potential suppliers and vendors. A low score may discourage potential partners from doing business with your company.
What is a good business credit score?
It can be confusing to know how to find your business credit score with multiple reporting agencies and scores. The three major credit bureaus are Dun & Bradstreet, Experian, and Equifax. You can access your full credit report with each bureau, though you will have to pay for it. These bureaus will calculate your credit score using different methods and ranking scales. A good credit score with one bureau may not be considered good by another.
Dun & Bradstreet:
| Business Credit Score | Rating Scale | Good Score | | ---------- | ---------- | ---------- | | PAYDEX Credit Score | 0 to 100 | 80+ | | Commercial Credit Score | 101 to 670 | 500+ | | Financial Stress Credit Score | 1,001 to 1,875 | 1,288+ |
| Business Credit Score | Rating Scale | Good Score | | ---------- | ---------- | ---------- | | Experian Intelliscore Business Score | 0 to 100 | 76+ |
| Business Credit Score | Rating Scale | Good Score | | ---------- | ---------- | ---------- | | Business Payment Index | 0 to 100 | 90+ | | Business Credit Risk Score | 101 to 992 | 700+ | | Business Failure Score | 1,000 to 1,880 | 1,315+ |
How to improve your business credit score
Credit bureaus base their scores on complex statistical models, and there is no guaranteed quick fix. But there are several steps you can take to try to improve it if your business credit score isn’t as high as you’d like. You can keep your score looking healthy by providing accurate and up-to-date information, responsibly managing your finances, and regularly reviewing your report. Here are some steps you can take to help give your business credit score a boost:
__- Make payments on time or early:__Your business credit score takes your company’s payment history into account. Always make credit repayments on time or before they are due. Remember that net terms are also a form of credit, so falling behind on these can also harm your score. - Bring your credit utilization ratio down: A credit utilization ratio measures the difference between the amount of credit available to your business and the amount that has been used. It’s recommended that you use less than 15% of your available credit. You can bring this ratio down by clearing balances, decreasing spending on your credit account, and increasing your overall credit limit. - Avoid making multiple credit applications: Credit checks from lenders on your business appear on your credit report. Multiple credit applications in a short period can be an indication of financial difficulties.
- Regularly review your credit report: You can ensure all the information is accurate and up-to-date by keeping an eye on your credit reports. You can dispute inaccuracies and identify any unfamiliar inquiries or credit applications. This can be a sign of fraudulent activity, and you should report it to the credit bureau immediately.
- Ask suppliers to share data: If you have a good payment relationship with a supplier or vendor, you can request they provide data to the credit bureaus. The more positive feedback on your company’s payment performance, the better your credit score is likely to be.
- Check your suppliers’ credit: If a supplier becomes insolvent, it can have a negative effect on your business’ credit score. If you have credit accounts with them, it’s worth monitoring their credit rating to mitigate this risk.
- Don’t neglect your personal credit score: Credit bureaus may use the personal financial information of owners when startups or small businesses have a short credit history. If this is the case, you’ll want to ensure that your own credit score is as high as possible.