A business credit score is a rating based on the predicted ability of a business to pay back its debts. It is calculated and determined by a third-party credit bureau by examining and assessing a business’ financial history. With this information, creditors and lenders can make decisions on whether or not to proceed with offering loans and credit to a particular business.
Today, there are three major business credit bureaus that calculate and issue business credit scores to businesses. Using their respective algorithms and criteria, Equifax, Dun & Bradstreet, and Experian offer business credit scores between 0 and 100, depending on a business’ payment history and other factors.
What are the benefits of a good business credit score?
By striving to achieve and maintain a good business credit score, a business can receive several benefits, such as:
More and better business opportunities
Investors and lenders are much more likely to lend you money if they see your Equifax, Dun & Bradstreet, or Experian business credit report and see a good credit score. Having a good Equifax, Dun & Bradstreet, and/or Experian business credit score can make them more interested in supporting your business ventures and open up your business to more and better opportunities.
Valuable insights about your business
Your Equifax, Dun & Bradstreet, or Experian business credit score is a representation of how your business is doing financially. Having a good business credit score means your business is on the right track. So, the higher your business credit score, the better your business situation is. It informs you that you have been making sound financial decisions so far, and lets you know that you should continue doing what you have been doing. It also allows you to receive approval for business loans more easily. On the other hand, if your business credit score is low, it signifies that your business practices may need some improvement. It could indicate, for example, that you need to make better decisions, pay your outstanding bills on time, or reduce your overall debt.
Create a solid safety net
our business may be doing well right now, but you do not know how it will be next month, next year, or in a decade. By getting a regular Equifax, Dun & Bradstreet, or Experian business credit report and working towards a good business credit score, you can build a strong safety net for your business that can be very valuable in case of a financial crisis. When the need to borrow money comes, your good business credit score can be your lifesaver.
Protect your own personal credit score
If you have a business, there might have been a time when you were tempted to apply for a personal loan instead of a business loan to fund your business costs. You should know that, while this might have been your only option in the very early days of your business, that it is not a smart long term play, because it doesn’t allow your business to stand on its own terms. Ideally, you’d want to build up your business credit so that your business can be in a better financial position and qualify for business loans, without putting your personal credit and personal finances on the line.
Criteria for a Good Credit ScoreNowadays almost all business uses the FICO system to make the lending decision quick and proper.
Although 670 isn’t necessarily bad credit, it won’t be enough for a high-end condo rental or mortgage.
However, your credit score does follow you around everywhere you go.It decides whether you can get a loan to buy a car or house.
It can even affect whether you get a job or a promotion.Bad credit is like a black cloud hanging over you everywhere you go.
A FICO score under 630 is considered as Poor Credits An average or Fair score is between 630 and 690Good Score is between 690 and 720An excellent score is anything above 720You’d be surprised how many people contact me with no understanding of what their credit score is.
You may save thousands of dollars in interest with a mortgage if you have a good credit score.Why Having a Good Credit Score is ImportantWhen you have a good credit score you can get the following benefits easily1.
In this blog post, our Co-founder Farzana explains why the website is important for small businesses.
