company credit score

What’s Your Company’s Credit Score?

Drive-thru:

  • Your company credit score is different than your personal credit score.
  • Strong business credit can help you get larger amounts of financing at lower interest rates.
  • It’s a good idea to separate personal and company credit profiles.

What’s Your Company’s Credit Score?

If you’re interested in growing your business and want to stay financially viable, it’s a good idea to take a close look at your company credit score. Just as FICO assigns a number to reflect your personal creditworthiness, your business is also rated.

Vendors and lenders will often view your company credit report when making decisions about providing credit and lending. Your credit score and payment history is an indication whether you honor your financial agreements.

Benefits of Strong Company Credit
Business credit may take time to build, but it makes your life easier in many ways, notes Andrew Latham of SuperMoney.com, a financial products and services comparison website.

“If you’re a small business, especially a sole proprietor, lenders may rely on your personal credit to make lending decisions. However, it’s usually a good idea to build your business credit,” advises Latham. “Having a good business credit score makes it easier (and cheaper) to get financing, your insurance rates may also be lower, and you’ll be able to apply for larger loan amounts.”

Building a healthy business credit score can also help protect your personal finances. The more credit you’ve built as a business, the less likely you’ll need to sign personal guarantees when taking out business loans or business credit cards. Such guarantees mean you’re personally on the hook to pay up should your business falter.

How Company Credit Scores Differ

Whereas your personal credit score is linked to your Social Security Number (SSN), your business credit is connected to your Employer Identification Number (EIN).

Personal FICO scores range from 300 to 850, but business credit scores tend to range from 1 to 300, depending on the company. The main ones are Experian’s Intelliscore Plus℠ premier business credit score model, the Dun & Bradstreet (D&B) PAYDEX score, and the FICO Small Business Scoring Service.

Factors that Affect Company Credit Scores
A variety of factors affect your company’s credit score. Your repayment history is one. If you pay your bills on time as agreed, the result is a higher credit score. The length of time you’ve had loans and the original amount of those loans also affects your credit score.

That’s not all, though. “When calculating a credit score and building a credit history of your business, credit bureaus collect additional information,” says Latham. “This includes data from vendors, trade associations, and business credit card issuers. They may also consider the age of your business, the number of employees, and annual revenue.”

Ways to Strengthen Your Company Credit Score
Strengthening your company credit score takes paying attention to the following details:

  • Set up trade lines with your suppliers. “Ask your suppliers to report your payments to the business credit bureaus,” says Latham. “Dun & Bradstreet, Equifax, and Experian are the biggest ones. This is important, as some credit bureaus will not even calculate a score unless you have a minimum number of suppliers reporting trade with your business.”

    In addition to the obvious choices, such as your building material suppliers, Latham suggests setting up trade lines with your water, coffee, and office supplies vendors.

  • Keep your company’s public record clean. “Do your best to avoid liens, judgments, and court rulings on your file, as they will stay on your credit history for years,” says Latham.
  • Pay off loans and credit cards on time. It’s crucial you make regular and on-time payments, as missed or late payments will damage your business credit score.
  • Choose business loan lenders that report your payments to the credit bureaus. “Not all lenders report to the credit bureaus,” says Latham, who suggests using a loan comparison website like SuperMoney as it allows you to filter lenders by the credit bureaus to which they report.
  • Keeping track of your company credit score and payment history may take some work, but doing so ensures that the financial side of your business runs as smoothly as possible.

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