Test Your Business Credit Score IQ

If you’re a small business owner in need of funding, there are ways to improve your chances of getting approved for a loan.

One thing lenders review is your business credit score. This number acts as a snapshot of your borrowing history and the company’s overall financial health. The higher your score, the more likely you are to get approved and lower your interest rate so that you have less to pay back and more to put back into your business.

See if you pre-qualify

This short Q&A can help you understand the importance of your business score and how to improve it over time.

5 Questions About Your Business Credit Score… Answered!

The more you know about improving your credit score, the greater the odds you’ll qualify for the loan you want.

Question 1: “If I have a small business, do I automatically have a small business credit score?”

Answer: No. There are certain steps you’re required to follow in order to obtain a business credit score.

You’ll need to:

  • Incorporate your business
  • Get your federal tax identification number (EIN)
  • Open a business checking out under the business’s legal name
  • Have a business phone number
  • Open a business credit file with all three reporting agencies: Experian, Equifax, and TransUnion
  • Have at least one credit card for your business
  • Have a line of credit with vendors/suppliers
  • Pay your bills on time

Meeting these requirements will get your business a credit score. Learn more about how to establish business credit, even if you have a limited credit history.

Question 2: “Can I just use my personal credit score instead?”

Answer: No, you should have two separate credit scores: business and personal.

While it might feel like an extra step, there are several good reasons to have both (and keep them separate).

  • Protect your personal credit score, especially if your business is sued. Without a separate business credit score, your personal assets are at risk
  • Isolate your personal savings in the event your business has to close
  • Make it easier to identify deductions for tax reasons.

When it comes to personal credit vs business credit, having a dedicated credit score makes good business sense and offers an extra layer of personal protection.

Question 3: “Can anyone request and view my business credit score?”

Answer: Yes! This information is public.

Your personal credit score is highly regulated, and people can only view them with your permission. However, your business credit score is available to the public. Anyone—including lenders and suppliers—can view it.

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Question 4: “Is there anything I can do to improve my credit score?”

Answer: Yes!

Here’s the good news about your business (and personal) credit score. If it’s lower than you want it to be and you’re worried it’s going to negatively impact your chances of securing a loan with a lower interest rate, there are certain things you can do to improve it.

  • Pay your bills on time, every month
  • Try to keep your accounts open (like credit cards), even if they’re not very active
  • Read through your credit reports for mistakes, and fix any errors you find
  • Be responsible when using your credit
  • Check on your credit score monthly
  • Maintain your levels of debt - don’t use more of your credit than you need

A good business credit score is a huge asset for your small business. A credit score of 700 or above will give you some of the best options when it comes to small business loans. A score of 550 and below likely means you likely won’t meet the requirements of most lenders. Learn more tips and requirements for small business credit scores.

Question 5: “Can’t I just check my credit score yearly?”

Answer: No, it requires more frequent check-ins.

There are a few reasons to check on your credit score on a fairly consistent basis. For starters, errors can pop up on your credit report at any point. Checking in with your report once a month ensures that you catch mistakes—including fraudulent activity or inquiries you want to remove—and address them in a timely manner.

Plus, keeping your finger on the pulse of your credit report helps you stay aware of your business’ financial health, helping you identify strengths and weaknesses in your spending, and ultimately improve cash flow.

In addition, when you know your business’s credit score, you can more accurately determine where you stand with respect to your competition.

If you want to know your credit score, each credit bureau (Equifax, Experian and TransUnion) is required by federal law to send a free copy once a year upon request.

Know your numbers: Master your business credit score

Your credit score is one of many factors that lenders will consider when determining whether or not they want to offer you financing. Here are a few key points to keep in mind:

  1. Just because you have a small business does not automatically mean you have a business credit score.
  2. You should not use your personal credit score in lieu of your business credit score when it comes to applying for a small business loan. You need both.
  3. Your business credit score is public information and anyone can view it.
  4. If you’re not happy with your credit score, take the steps outlined above to improve it.
  5. You should check your credit score every month.

Are you already good to go with a solid credit score? Learn what else it takes to qualify for a small business loan.

*We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

WHAT YOU NEED TO KNOW: The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial processionals for further information.

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