When people go into business for themselves, they don’t always realize that their personal credit score and their business credit score are two different things. Both are equally important, but business lenders will look at the latter score to make most of their decisions about extending credit. As with your personal credit history, the creditors for your business account report your payment history to a commercial credit reporting agency.
Business and Personal Credit Scoring Algorithms
Business and personal credit scores both operate on the premise that the higher the number, the greater your credibility. However, the score ranges are quite different. While a personal credit score typically ranges from 300 to 850 with anything above 750 considered excellent, a business credit score only goes up to 100. The score takes several factors into account, including the following:
- Your specific industry
- The percentage of each credit line that you use each month
- How long your business has been in operation
The major business credit reporting agencies are Dun & Bradstreet, Transunion, Experian, and Equifax. FICO Small Business Scoring uses a different scoring algorithm and may assign your company a score up to 300. Despite this difference, it evaluates the same factors to determine your business credit score.
A Good Credit Score is Essential to Grow Your Business
Financing business growth is often one of the biggest challenges faced by new business owners. Most only have enough funds to keep the company going day to day and rely on borrowed money to expand. Making too many mistakes with your business credit early on can have a major impact on your ability to borrow money in the future. Since business loans tend to be for much higher dollar amounts than personal loans, lenders are especially cautious about borrowing money to any business owner who has struggled to repay previous debts.
Need tips on improving your business credit rating? Contact Simplicity Capital today.
