Today we’re diving into business credit. While it’s important to have good personal credit, it’s also imperative to have good business credit. Business credit is especially important when applying for a business loan or lease.
Business credit may be the deciding factor to receive top-notch rates, premiums, or payment terms. It can even determine whether or not you qualify for a loan or lease in the first place. Here are a few tips to ensure your business credit score reflects the potential of your growing business.
1. Maintain Records with All 3 Business Credit Bureaus
Unlike personal credit scores, which have a standard FICO calculation, business credit scores are determined differently by each credit bureau.
Lending companies may utilize a service such as PayNet which pulls business credit from a database of over 25 million small business loans to determine risk and future loan preference.
Additionally, you want to keep on top of your business credit records at Dun & Bradstreet, Experian, and Equifax credit bureaus. Make sure each has your accurate information. Each of these bureaus use a slightly different scoring model for business credit. While you won’t know which report a lender will choose to pull, you can keep track of your records. If your business pays its bills on time, you will improve your score over time.
Business credit scores are determined differently by each credit bureau.
Maintain your records by providing these credit bureaus with your updated information, such as a change in business address. By keeping up with all 3 credit bureaus, you ensure all records accurately reflect your company.
2. Make Your Payments ASAP
Your payment history is important to all three business credit bureaus, despite their unique individual score calculations. It’s important to pay these bills as soon as you’re able to. This will help positively impact your business credit score.
In fact, some scores even offer incentives to pay bills early. For example, you can only achieve a perfect 100 Paydex score by making your payments early. Your payments are also weighed by dollar amount – the higher the payment, the heavier its weight on your score. This means that a late payment on a high bill will affect your score more than an early payment on a low bill. So keep an eye on your due dates to ensure that your score remains optimal!
Payments are weighed by dollar amount – the higher the payment, the heavier its weight on your score.
3. Open Tradeline Accounts
To calculate your score, business credit bureaus need to collect data on your payment history with vendors. This can include office supply stores, small business credit cards, and small business loans.
Though it takes time to establish, you’ll get a higher score with an extensive credit history showing on-time payments. Then your score will better reflect your ability to make timely payments on business bills. And this helps assure lenders that your business holds a low risk for funding. Higher scores can lead to lower interest rates and more convenient payment terms for you and your business.
Though it takes time to establish, an extensive credit history showing on-time payments increases your credit score.
While building business credit takes time and meticulous effort, the advantage is worth it. Your credit score reflects how well your business handles money, and there are plenty of benefits to be reaped!