Business Credit Score

You have put in the work, wrestled with long hours, and applied yourself thoroughly to start your own business. Your new company is your baby and the fruit of your time and effort. All too often, a business credit score can become overlooked or undernourished. What is a business credit score, and why is it an invaluable aspect of the growth and stability of your business? 

Throughout this article, we will explore the intricacies involved in understanding and utilizing your business credit score to allow for growth and mobility within your company. Please contact Outsource Financial Services today for a free credit score check. We are family-owned and operated in Denver, Colorado. 

What Is Your Business Credit Score?

Business credit scores are similar to personal credit scores, except that they are solely based on your business and are in no way connected to your personal credit score. Your business score is derived, for the most part, from three main credit bureaus: Dun & Bradstreet (D&B), Equifax, and Experian. Each of these bureaus uses similar but varying methods involving payment history and any judgments or liens against the business. They will also use public information from vendors, suppliers, credit lenders, credit card banks, and collection agencies to analyze risk. This assessment then transfers into loan interest rates and, ultimately, opportunities for business growth.

Factors with your business credit score are derived from various information related to your business records. Your payment history, specifically your number of on-time payments versus any delinquency, is perhaps the most crucial information. Another involves outstanding balance or the total debt that your company currently owes. Factors such as your business size and the longevity of your business are also considered. Several of these determinants are out of your control. Improving the aspects within your control will ultimately benefit your business.

Banner Ad Cash Flow Blue

Why Is Your Business Credit Score Important

Your business credit score directly affects the ease and interest rates of loans. Your score gives lenders a quick reference to your business’s ability to make timely payments while assessing your chances for delinquency and late payments. In addition, your score influences the interest rate lenders will attach to any given loan. This interest rate directly affects the cost of your payments. With aspirations of growth and sometimes just everyday business expenses, loans become vital. Having a good understanding of your current credit score will allow you to formulate the best choice.

How Often Should I Check My Business Credit Score?

Most resources suggest you check your business credit score every few months. Frequently reviewing your score allows you to monitor changes that occur. It can help you to catch abnormalities that arise. Sometimes, these are a result of fraudulent activity on your accounts. Unfortunately, attacks on personal and business accounts happen. Protecting your finances from misrepresentation encourages creditors and vendors in the security and competency of your business. 

It is also essential to have a good grasp of your score before applying for a loan. Reviewing your credit score several months prior to applying for financial assistance is advisable. Various changes can often be made to improve your credit before you seek a loan. In the long run, this can lower your interest rate and thus save you a significant amount of money. 

How Can I Improve My Business Credit Score?

Improving your business’ credit score is not as daunting as it may seem. Often, the day-to-day tasks of running a business overshadow the financial needs. You can take several very achievable steps to raise your credit score.

  • Make sure that your business records are current, and confirm accuracy.
  • Set up automatic payments; paying on time or early can be the most efficient way.
  • Consider opening a business credit card or new line of credit.
  • Utilize a respectable amount of your credit limit before paying it down to zero.
  • Seek out a loan to consolidate your debt.

It is crucial to be proactive in this process. In doing so, you should see very positive results.

Conclusion

The importance of your business credit score should not be underestimated.  At the same time, your score should not be something to fear. With careful monitoring, it will be easy to assess problems and find areas for improvement. The main goal should be to create stability for your business while increasing the opportunity for growth and development at the same time. We hope this article presents valuable information that will be valuable in gauging your business credit score and how it applies to the current needs of your business.