Business credit score provides credit agencies, loan issuers, and vendors or suppliers with a general idea of how trustworthy you are when it comes to borrowing money. Just like your personal credit score, a higher business credit score tells interested parties that you’re more creditworthy. If you’re a business owner and you want to establish strong business credit, keep reading to learn more.

What is a business credit score?

A business credit score is exactly what it sounds like it would be—a credit score that applies to businesses instead of individuals. Generally speaking, business credit scores are determined using information from a business credit report, which can include company details like the number of employees a business has, historical data of the business, past payment history, account information, amounts owed, and more.

When it comes to business credit scores, you’ll probably notice right away that they don’t fall in the same numerical range as personal credit scores. Most business credit scores are ranked on a scale of 0 to 100, while business scores using the FICO Small Business Scoring Service (FICO SBSS) range from 0 to 300.

Establishing good credit scores is important because:

Suppliers often look at your business credit score before offering terms, and having good credit makes it easier to negotiate favorable terms with them

Banks rely heavily on business credit scores and FICO scores for establishing lines of credit.

In the absence of a business credit score, you need a very strong personal credit history to qualify for a small business loan based on your personal credit alone

Dealing with credit scores can be challenging because:

It often takes at least a year or two to establish or improve your business credit history or personal credit history

You can influence and improve your credit scores with effort, but you cannot directly change them since they are given to you by external rating agencies

Internal record keeping and monitoring small business credit scores can be time-consuming

How to Check Your Business Credit Score?

If you wish to obtain a credit score or report from any of the above companies, you will generally need to pay for the information. With some, such as D&B, your first report may be free, as long as you sign up for a D-U-N-S number in the process. We recommend contacting a sales representative at these companies, and seeing if you can qualify for a free report.

Why Is a Business Credit Score Important?

Having a good business credit score makes it easier to get business financing. If you can’t get business financing, you’ll have to rely on personal savings, a personal credit card, home equity, or another method of financing. What’s more, with a good business credit score a lender or vendor may not require a personal guarantee, which means they won’t be able to go after your personal assets if you default or miss a payment.

How Business Credit Scores Work

Business credit scores are generated by four major business credit reporting agencies—Dun & Bradstreet (D&B), Experian, Equifax, and FICO. They use information such as when your business started its operations, credit lines, and payment history to calculate your business’s credit score.

The most common business credit scores typically range from 0 to 100 with the exception of FICO, which ranges from 0 to 300. A score in the top 20% of the range will typically be considered good. To ensure your business maintains a strong credit score, be sure to pay all your debt obligations on time or early.

How They’re Calculated

While the basic calculation for personal credit scores, such as FICO, is public knowledge, credit agencies that produce business credit scores are more secretive. Each agency has its own formula, and most don’t disclose exact details about their scoring algorithm.

We have always emphasized the importance of having a good website for your company because it can act as your best tool for marketing and sales. A poorly designed website can repulse people from your business and can cause you to lose customers before you even have them. Get in touch with HyperEffects to work on creating, enhancing, and making the website of your company more user-friendly.