How Do Business Credit Scores Work and How to Improve Your Company’s Standing
Business credit scores are vital because they tell potential lenders and investors a lot about the financial health of your business. This article goes over the basics of what goes into a business credit score and how to monitor and improve your business’s rating.
What Goes into a Business Credit Score
Several factors go into determining the credit score of your business. Different rating agencies use different metrics, but in general, they will look at the following:
- The age of your business, with longer-running businesses tending to score better.
- The size of your business.
- Your business’s payment history with lenders, vendors, and creditors.
- How much of its available credit your business uses, with lower usage tending to be preferable.
- Credit inquiries, with frequent inquiries being a negative factor.
Monitoring Your Business Credit Score
Forbes.com recommends checking your business credit score once or twice every year. You can obtain a credit report from one of the major monitoring agencies. Those agencies are Dun & Bradstreet, Experian, Equifax, and FICO. Some agencies may provide an initial report for free; however, you will eventually need to pay for ongoing reports from any of the agencies.
Improving Your Business Credit Score
If your business credit score is lower than you’d like, there are several steps you can take to improve it. For instance, obtaining a credit report from one of the aforementioned agencies is important because you can scan it for errors and then take steps to correct those errors by contacting the agency.
Other tactics for improving your business’s score have a lot in common with the steps for improving a personal credit score. Diligently making payments on time, avoiding excessive debt, and conservatively using the credit you already have will boost your business credit score over time.
For more tips on the business world, take a look at Approved Business Lending’s other blog posts.
