How to Demystify Your Business Credit Score

A business credit score is a number which theoretically represents how credible and trustworthy your company is, and it’s commonly consulted by lenders who need to know whether it’s safe to loan money to you. Generally speaking, a high score indicates that you have been conscientious about paying your creditors, while a low score means you have been less responsible about it.

How a business credit score is calculated

The factors which go into calculating your business credit score include your company size, length of credit history, credit utilization ratio, payment history, and any public records which might indicate judgments or bankruptcies against you. There are three major bureaus which compile information on businesses for the purpose of establishing a credit score, those being Dun & Bradstreet, Experian, and Equifax. While there are several more such companies, these are the three major ones, and they are the ones most commonly consulted by lenders.

What your credit score means

The major bureaus use a scale of 1 to 100 in representing the health and reliability of your business, with a score over 75 indicating good credit and a low lending risk. It’s generally to your advantage to register with one or more of the credit bureaus so that potential lenders have something to consult when trying to determine your credit-worthiness. You can even work with suppliers who report your payment history to a particular credit bureau, so that your timely payments will be recorded, and will help your cause.

Improving your business credit score

You may have a poor business credit score simply because you haven’t been in business for very long, or because vendors you work with have not reported your timely payments. Then again, it could be that you have routinely paid your creditors late, and the business credit score is a legitimate reflection of that lateness.

In order to improve your business credit score and your lending profile, there are a few steps you can take:

  • Establish multiple lines of credit – open up accounts which engender a mix of credit sources, e.g. line of credit, installment loan, business credit card
  • Make bill payments promptly – there is no substitute for paying your bills on time or before the due date, and once you make a habit of this, you’ll find that your business credit score starts rising quickly
  • Establish a good credit utilization ratio – the rule of thumb for establishing a good credit utilization ratio is having no more than about 25% of your available credit in use at any one time.

Contact Revap Group Capital for Funding

Even if your business credit score isn’t as high as it might be, please contact the financing experts at Revap Group Capital about your funding needs, and let us help you get the working capital you need for your business.

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