What Is A Good Business Credit Score? Guide to Understanding Business Credit Score

It’s important that every small business owners is aware of their business credit scores and actively monitor. These scores are important and can financially impact your business. Here’s what you need to know to establish and maintain a strong score.

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Business credit quiz

To get started, answer a few business credit questions here to identify information you need to brush up on: Test Your Business Credit Score IQ. Questions cover improving your score and requesting your business credit report.

The difference between your personal credit scores and your business credit scores

Business and personal credit scores are often independent of each other and they measure different things. Your personal credit score indicates your creditworthiness—your personal ability to pay back a debt. Personal credit scores are used for automobile and home purchases. On the other hand, a business credit score measures the ability of your business to meet financial obligations and are used for lending, insurance rates, and more.

Why you should keep personal and business credit scores separate

In short, you want to protect your personal savings. If you don't separate personal and business credit scores and your business fails, you risk losing your personal savings. Additionally, if your business is ever sued, other personal assets could be at risk.

Separate business credit has another big advantage when it comes to tax time. It will be much easier to identify business expense deductions for tax purposes.

Identifying a good business credit score

Major business credit reporting agencies Dun & Bradstreet, Experian, and Equifax produce business credit scores and reports. FICO scores for small businesses are known as “FICO SBSS.” In short, your FICO SBSS score is calculated by reviewing personal and business credit history. Other business financial information also comes into play like the age of your business, number of employees along with financial data, like revenue and assets.

The SBSS score ranges from 0-300 with the higher your score, the better.

Why do I need a business credit score?

Good credit scores are always important. Here are reasons to maintain your score and strive for strong numbers.

  • More borrowing power - Businesses with higher scores have a better opportunity at securing financing, and a higher business credit score typically means being charged a lower interest rate on financing. You’ll also have a better chance at getting funding when you need it.
  • Rates on insurance policies could be lower - Getting ready to apply for business insurance is a lot like preparing to apply for financing. While a business credit score is not typically required, insurers may ask to access your business data after you apply. Just like with loan applications, having a better business credit score can lower the price of your policy, whereas a worse score can mean you’ll be spending more on business insurance. For help determining insurance you should have in place to protect your business, review this article from SmartBiz Loans: Evaluating Insurance Needs | SmartBiz University.
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How is a business credit score calculated?

Each bureau collects and verifies information differently. In short, your FICO SBSS score is calculated by reviewing personal and business credit history and other business financial information.

How can I find out my business credit score?

Your business credit score is available through the following bureaus:

Dun & Bradstreet

Dun & Bradstreet, or D&B, generates both reports and scores for businesses that have credit files with them. But you’ll need to put in a bit of work to create this file, or it could appear incomplete. To build a complete credit file through D&B, you first need a D-U-N-S Number, a nine-digit identifying number for your business. D&B may have already created one for your company, but if not, you can get this for free in up to 30 business days through D&B’s site. You can access the D&B site here.

Equifax

From verified business identities and detailed credit history to business owner and corporate linkage, Equifax Business Credit Reports give business owners insight to assess their financial performance. Access your report here.

Experian

Check out a sample business credit report from Experian here. Your report will contain background information, business financial information, credit score and risk factors, UCC filings and more.

There are other organizations that offer business credit reports – some of them at no cost. Find them here: Business Credit Check: Where You Can Get Yours.

Ways to improve your score

If your scores aren’t where they need to be, there are strategies you can use to raise your number:

  • Pay your bills on time – Missed payments will sink your credit rating no matter what you do.
  • Watch for errors – Dispute discrepancies with the credit card company or the reporting agency.
  • Follow up when settling debts – Make certain the agency removes any settled collection accounts from your report after paying off the debt.
  • Start credit accounts with suppliers – This is a good way to increase the number of on-time payments. It will help elevate your score.
  • Reduce your credit utilization ratio – The lower your overall utilization the better. It is recommended that this ratio be no more than 30 percent. If you’ve maxed out your cards and have little to no available credit, this brings your standing down significantly. Request that your credit limit is raised or use cards less.

Mistakes that can hurt your score

  • Closing accounts too soon – When accounts are gone, creditors won’t be able to see them or consider them part of your history.
  • Using too much personal credit – Relying too much on personal accounts means your business isn’t building its own history.
  • Not checking your score regularly – Keeping a close eye on your reports will help you spot any errors and address them swiftly.
  • Thinking you have wiggle room – Being even a day late on payments can ding your score.
  • Believing reporting is foolproof – Bureaus use company name and address so your business might be confused with another.

Additional resources

The SmartBiz Small Business Blog has more information about credit, especially if you’re seeking low-cost capital. Here are articles to review:

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