by Patricia Glover Jan 17, 2022Share On:
Good credit is an asset to any business. It helps with securing credit cards, loans and leases, and can aid negotiations for favorable terms with vendors. It can also prevent business owners from having to put their assets or creditworthiness on the line by separating their business's credit from their credit reports and scores.
What constitutes a good business credit score? Each of the three major business credit reporting agencies uses its scoring model. Moreover, every vendor and lender is likely to have its criteria, so there's no universal standard for what's good or bad. There are, however, some guidelines you can use for a general reference.
What Is a Good Business Credit Score?
To help get some context for your business credit score, you can start by looking at how business credit scoring ranges might correspond to levels of risk. The Federal Reserve’s 2020 Small Business Credit Survey provided a handy definition of risk levels using both personal and business credit scores:
While fitting into one of these risk levels doesn’t necessarily translate into absolute success or failure in accessing funds, it can certainly help your odds. In the Fed survey, 62% of low-risk applicants for small-business funding received all of the money they requested, compared with 39% of medium-risk applicants and just 23% of high-risk borrowers.
Experian’s Intelliscore PlusSM uses the following ranges to describe risk:
How Do Business Credit Scores Work?
Business credit scores are similar to personal credit scores in several regards. In both cases, financial institutions and other account owners report your account and payment information to credit reporting agencies. Agencies use this data to create credit reports, which in turn are used to calculate credit scores. A business’s credit score is an indicator of the level of risk it represents when it comes to missing payments or defaulting on debt.
Where most modern general-use personal credit scores range from 300 to 850, business credit score ranges can vary. Experian business credit scores range from 1 to 100. An Experian business credit report typically contains identifying information; payment history; public records of judgments, liens, or bankruptcies; inquiries; company background; and your business credit score..
As with personal credit scores, the precise formulas used to calculate your business credit score are proprietary. But the factors that contribute to the calculation are known:
Where Can I Check My Business Credit Score?
The best way to understand your business credit reports and scores is to see them for yourself. Here’s where to go to access your score and report:
● Experian: Visit Experian’s website or sign up for Business Credit Advantage credit monitoring.
Credit monitoring can also help you stay on top of your business’s credit. Experian’s business credit advantage provides access to your current business credit file, sends alerts when any changes occur, and even offers tips for improving your company’s credit standing.
How to Improve Your Business Credit Score?
Improving your business credit score generally involves two steps: establishing credit and building on your existing success. Here are a few tips to get you started:
Finding Room for Improvement
Focusing on business credit is a worthwhile practice: Good credit is the key that unlocks funding for growth, resources in an emergency, low-interest rates, and great supplier terms to promote efficiency and a host of other building blocks for financial resilience.
Check up on your business credit and, if warranted, look for ways to improve your score. To paraphrase an old cliché, you can never be too rich or too creditworthy in business.
Of course, as you may know, there are many benefits to having a business credit card. You can earn rewards or points that you can use toward travel and other purchases, you get special pricing on products and services that your company might need and more.
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It sometimes appears to be an insurmountable challenge to build a credit score for business needs.