Understanding the Numbers on Your Business Credit Report
It’s easy to prioritize a number of factors ahead of maintaining your credit score. However, doing that can end up costing you in the long run. With good business credit, you increase the odds of getting favorable terms on all of your future financing and leasing deals. If you’re wondering how you can improve your score, you need to have a solid idea of how the credit systems work.
What Does the Score Represent?
When you compare the credit of your business to your personal score, you’ll immediately notice the numbers are way off. For your company, the score ranges from 0-100, whereas personal credit is on a scale between 300 and 850. In short, the score you’re given indicates how creditworthy your business is, and the number takes into account the various debts and balances that already exist under your company’s title. While your business credit score is typically determined exclusively by business dealings, you should know that smaller enterprises can have scores influenced by personal finances as well.
Who Assesses the Score?
There are three primary credit bureaus for business that gather data and process scores. While there are variances in the systems that determine your credit, the general procedure is to collect data from all institutions with which you have business dealings – banks, private lenders, online analysis firms – and then verify that information. After a bureau has assessed your data and vetted its findings, a score is given. There are plenty of other details at play, but those are the broad strokes.
What Are the Benefits of Good Credit?
A strong business credit score can help entrepreneurs in a variety of ways. The most important factor is usually financing terms. If you have a score that indicates you’ll pay off your debts and make good on an investment, you’ll typically see a better APR on any loans. Even if you don’t plan on borrowing money for your business, your credit score will also help you with leases on equipment and property. Should you try to work out some sort of consumer financing, strong credit will likely help with those terms as well. Since it’s relatively easy to obtain a copy of your credit, it’s definitely worth looking into and seeing what can be improved.
If you want your company to continue growing and succeeding, you should take whatever steps possible to improve your business credit. Understanding your credit numbers will make it much easier when you start trying to raise your score.