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.
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.
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.
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.
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.
Good credit scores are always important. Here are reasons to maintain your score and strive for strong numbers.
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.
Your business credit score is available through the following bureaus:
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.
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.
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.
If your scores aren’t where they need to be, there are strategies you can use to raise your number:
The SmartBiz Small Business Blog has more information about credit, especially if you’re seeking low-cost capital. Here are articles to review: