The Basics of Building Your Business Credit Score
Most people are familiar with their personal credit scores, but business owners who utilize business credit cards have business credit scores to be concerned with as well—and many business owners don’t realize it. As a business owner, staying familiar with the credit score of your business is essential for securing acceptable terms on business insurance policies and small-business loans.
Business credit scores are similar to personal credit scores in that they are a measure of reliability when it comes to paying bills in a timely fashion. FICO scores are the most commonly used personal credit-scoring model, and business credit scores have some similarities to FICO scores, such as using a numerical system for credit measurement and basing that measurement on the number of on-time payments made.
There are several key differences in FICO scores and business credit scores, including privacy levels, access, and numerical range. When it comes to privacy levels and access, for example, business credit information is readily available to the public unlike personal credit scores, and while personal credit scores can be accessed for free, businesses have to pay to see their credit score every time. When it comes to range, personal FICO scores range from 300 to 850 while business credit cores range from zero to 100.
If your business is fairly new, chances are you’re using your personal credit to move things along financially. Even if your personal credit is capable of taking on the financial obligations of your business, establishing separate business credit is still necessary for smooth operations in the future. With a proper business credit score, companies can enjoy benefits such as lower insurance policy rates, increased borrowing power, increased chances for getting financing, and the necessary separation of business and personal finances.
In order to find out your business credit score and begin improving upon it, make sure to check your scores from the three business credit bureaus (Dun & Bradstreet, Equifax, and Experian) at least once a year. A Dun & Bradstreet credit report costs approximately $60 and includes a credit summary, industry payment benchmarks, and up to six months of credit report access. Equifax credit reports cost about $100 and also include business failure scores as well as credit scores. Experian credit reports cost about $40 and include everything Equifax does, minus a credit risk score. Experian reports also include payment summary trends. Armed with the knowledge present in these three credit scores, businesses—especially small businesses—have the power to thrive financially at all times.