Business Credit Score Basics

A business credit score is similar to a personal credit score in that it serves as a gauge of creditworthiness, but in this case, it pertains more to the health of your business and not to your personal finances. Unlike a personal credit score, the business version has a smaller scale, from 0 to 100, and a good score is anywhere between 80 and 100. Businesses with credit scores between 50 and 79 are less likely to secure loans than those with scores between 80 and 100, and those below 50 will generally find it very difficult to qualify for any loan.

Determination of business credit score

All data associated with the tax ID of your business is evaluated when calculating your business credit score, so it’s probably best if your personal ID is separate from your business tax ID. The information which is evaluated includes outstanding debts, how you pay your bills, the size of your business, the number of years you’ve been in operation, and all public records relating to your business. The organizations which gather this information and provide the actual scores are Equifax, Experian, and Dun & Bradstreet, and all three of these will charge you for their services.

Significance of a business credit score

If you never have to take out a business loan, then your business credit score really won’t have much of an impact on your company. It also doesn’t usually matter when you secure funding through alternative lender sources, because most often, the approval for any financing from alternative lenders is based on criteria other than credit history, or on the strength of your business. However, if you ever intend to take out a small business loan or any other kind of loan from a conventional lender, your business credit score will be of extreme importance, and it just might be the make or break factor in determining your approval for a loan.

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