Everything You Need to Know About Your Business’s Credit Score

Nov 18, 2022 by Sage Thee

First things first, what is a business credit score?

  • Similar to your personal credit score, a business credit score is a credit score that applies to a company instead of an individual.
  • Most range from 0-100 (unlike personal credit scores, which range from 350-800).
  • The FICO Small Business Scoring Service (FICO SBSS) ranges from 0-300.

Why is your business credit score important?

Lenders, suppliers, and potential business partners will often rely on business credit reports to help determine the risk associated with certain companies and use that information to help decide whether or not to do business with them.
 
A business credit report is essentially a snapshot of the financial and credit health of a company, typically including:
  • Company’s financial profile
  • Tradeline payment history
  • Recent credit inquiry history
  • Any legal findings (including judgments, collections, and bankruptcies)
  • Credit score, which indicates your business’ creditworthiness and the level of risk posed to future creditors.
  • Depending on the credit provider, there may also be a “financial stability score” predicting future financial health.

How to read your business credit report:

 

1. Business/Company profile

 
The SIC and NAISC codes are listed because each industry contains different levels of credit risk. As a result, companies in lower-risk industries might obtain credit and insurance easier than higher-risk industries.
 
Quick check: The highest-risk SIC classifications include:
  • Real estate investing
  • Other types of investing
  • Car sales
  • Travel/transportation industry
  • Money lending/collecting
  • Restaurants
 
2. Tradeline Payment History
  • Shows your company’s payment history over the last three years.
  • This section also includes when a transaction was first reported to the credit bureau, payment terms, recent high credit line, maximum credit line, monthly payment, and whether it’s current or delinquent.
  • It will also show how often you’ve been delinquent on a tradeline of 30 days late or more.
 
3. Commercial Financial History (recent credit inquiry history)
  • Shows your payment history with creditors, lenders, and insurers.
  • Shows when the tradeline opened, the terms, both the starting and current balance, and any delinquencies on the account.
  • Business loans, insurance policies, lines of credit, and equipment leases will show up in this section.
4. legal filings, bankruptcies, and collections
  • If your business has any legal filings, bankruptcies, or collection reports that have been filed with the credit bureau, they'll show up here.
  • Tax liens, judgments, and accounts placed into collections after being delinquent for 90 days will be noted here.

Similar to your personal credit score, your business credit score can be impacted by your credit utilization, the length of time you've had credit, and the amount of delinquency you have on your report.

What does your business credit score affect?

Your business credit score influences what loans and lines of credit you're eligible for, your credit and payment terms, interest rates, and approval rates for loans.

Business credit scores play a part in how lenders judge your company's eligibility for lines of credit, such as loans and credit cards.

How to check your business credit score:

Your business credit score is essential, and luckily there are plenty of free and paid services to find out (and improve) your business credit score.

Free Paid
Dun & Bradstreet Credit Signal Experian Business Credit Report

What's offered:

Alerts when your D&B credit scores and rating change.

• Monthly summary of activity in your business credit file.

• Learn how often your business credit file is being accessed.

What's offered:

Alerts whenever your Experian credit file changes.

• Learn what factors affect your business credit score.

Cost:

CreditScore Report: $39.95

• ProfilePlus Report: $49.95

• Business CreditAdvantage: $189/year

• Business CreditScore Pro: $1,495/year

Nav Business Credit Reports Equifax Business Credit Report

What's offered:

Summary of your Dun & Bradstreet, Experian, and Equifax business credit reports.

• Receive business credit grades for each score, plus your personal Experian credit score.

• Tools to help you build business credit.

What's offered:

Access your Equifax risk scores (Equifax Business Credit Risk Score and Equifax Business Failure Score).

• Receive a summary of your business's credit accounts with banks, suppliers, and service providers.

• Identify potential risk of late payments and business failure with Equifax Risk Scores.

Cost:

• $99.95 — $399.95

 

How to improve your business credit score:

1. check your credit report

Checking your credit report is the first necessary step in making sure your credit score is squared away. Once you know your score, you know what you’re working with and can get the information needed to raise your score, including which accounts are negatively affecting your score and any disputable items on the report.

2. pay your bills on time

We know it’s a bit of a no-brainer—but paying your bills on time is the easiest way to improve your business credit score. If you don’t pay your bills on time, your credit score will suffer, and anything else you do to improve your score will just be canceled out by the fact that you’re still considered a debt risk.

3. decrease your credit utilization ratio

Credit utilization ratio = ratio of credit used in relation to the amount of credit available.
Your credit utilization ratio plays a significant role in your business credit score. We recommend keeping your ratio under 15%. There are a few ways to make that happen:

  • Pay off your balances:
    It might seem obvious, but paying off your balances ensures your credit utilization ratio decreases. If you can’t pay them off entirely just yet, make sure to get them down as low as you can.
  • Increase your credit limit:
    Simply ask your credit card provider to increase your limit, and voila! You’ve just decreased your credit utilization ratio.
  • Decrease credit card spending:
    The less you and your team are spending on credit, the better. Paystand’s DeFi card can help you control corporate spend through assigning corporate cards internally for your company or externally to work as a new virtual payment method for your merchants or company expenses.
  • Open a new line of credit:
    This may seem counterintuitive, but having more credit available and not using it all makes you look even better to credit reporting agencies.
  • Pay your bills more frequently than once a month:
    Paying your bills on a bi-weekly basis, for example, helps keep that ratio down as the spending won’t pile up over the course of the whole month.
4. establish credit accounts with suppliers

Work with certain suppliers often and have a good payment relationship? Establish a credit account with them to increase the amount of positive payments in your credit file.

5. add positive payment history to your credit file

Not all vendors and suppliers report payment data to business credit-reporting agencies, but you can manually add trade references to your business’s credit file through the credit reporting agency.

6. dispute any errors and inquiries

If you see something on your report that shouldn’t be there, call the credit reporting agency to dispute it. It’s crucial to make sure that what’s being reported on your business is accurate and up-to-date.

7. "pay for delete" with collections

When running a business, accruing debt is all but unavoidable. When paying off debts that went to collections, make sure the agency deletes the negative account from your credit report.

Improve your business credit score with our DeFi Card

Our DeFi Corporate Card allows you to provision cards for teams instantly, designate expense categories, and track spend by account, class, and category. You can assign corporate cards internally for your company or externally to work as a new virtual payment method for your merchants or company expenses.

With real-time expense tracking and our touchless and secure virtual card platform, you are in total control of your money—and you're earning Bitcoin rewards on every transaction!

Click here to learn more about our DeFi Corporate Card, or to get your own. We can't wait to help your business thrive in the digital economy.