How to Check Your Business's Credit Score & Why It's Important

Published July 19, 2019 by WC Team

Consider your business’s credit score as something similar to a report card. It shows how well your company has done at paying its debts on time and is therefore quite important to insurance providers, lenders and contractors alike. As a motivated entrepreneur who cares about your future prospects, it makes sense to learn as much as you can about your score and how to obtain it.

Business Credit Score 101

There are three major bureaus that calculate business credit scores: Experian, Equifax and Dun & Bradstreet. Each of these has its own proprietary algorithm for coming up with a unique credit report. In order to obtain these figures, the bureaus use data from your business accounts but stay away from your personal records. The information in business credit reports is publicly available to you and anyone else who requests it at a fee determined individually by each bureau.

Why Is Your Business Credit Score Important?

There are several reasons why establishing good business credit is a very good idea. These include:

  • Getting on the right foot with lenders. If you demonstrate robust credit, lenders will be more likely to determine that you are someone who will abide by the terms of a business loan or line of credit./li>
  • Lowering insurance rates. Purchasing business insurance is a must, and its costs can rise as your business grows. However, good business credit might help to keep those costs more manageable.
  • Separating your business from your personal records. In the beginning of your undertaking, you most likely will need to blur the lines between your own and your company’s credit. However, burnishing your store’s credit can help to begin the necessary process of separating its records from your own. In so doing, you and your family will gain an extra layer of protection and will not be left holding the bag should the worst happen with your commercial fortunes.
  • As your credit score rises, your company’s borrowing power is amplified. This makes it possible for you to get higher amounts of capital should you need it.

How Business Credit Scores Are Determined

As stated above, each of the credit bureaus independently calculates their own credit score for your business. However, they all request relevant information about your company from trade associations, other business credit card issuers, banks and other lenders. The findings are generally verified via third-party companies.

Dun & Bradstreet

This bureau calculates your risk by computing a Paydex score ranging from 0 to 100 based on payment data about your business. Your Dun & Bradstreet report will contain this as well as a Commercial Credit Score and a Financial Stress Score.

Equifax

Equifax computes three variables: your payment index, credit risk score and the business failure score. These assessments use various data to estimate how reliable you have been in making payments, the likelihood that your business will be delinquent on payments in the next few months and the chances that it will close down within the next year.

Experian

Experian’s CreditScore report furnishes a comprehensive look at information such as your account transactions, business credit score and public records. Because it looks at more than just your payment history, you can obtain a more far-flung synopsis of your company’s credit-worthiness.

If you want to obtain reports from these or other commercial bureaus, contact them directly, and expect to pay a fee.

Understanding the information on your company’s credit scores and reports is crucial. These compendia of data are the resources that lenders, insurers and vendors use to assess your integrity and stability. Therefore, it is in your best interest to obtain your most recent bureau reports today.

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