How to Comprehend your Business Credit Report
Your business credit score is a measure of how creditworthy your company is. While the main purpose of the credit score for your business is the same as your personal score, the way they are determined, the score range and your access to them differ. A high score has its benefits, and a low score can result in missed opportunities. Here are some tips on understanding and raising your score.
The main benefit of having a high credit score for your business is that it can help you obtain better financing. You can often qualify for lower interest rates and larger amount limits. It also helps keep your personal and business finances separate, which is useful during tax season. When you are negotiating prices for your business owner’s insurance package, a higher credit score may help you get a better deal with lower premiums.
Unlike your personal credit score, your business credit score is calculated differently by the three credit bureaus that service businesses. You must pay to see a copy of your report from each bureau, and they each offer slightly different information.
Your Dun & Bradstreet score is determined solely by your payment history. By paying your bills on time and requesting a report of a positive payment history to the bureau from business partners, you can raise your score. A D&B report also includes a commercial credit score, which predicts the probability of a delinquent payment in the next year, and the financial stress score, which predict the likelihood that your business will fail within the year.
Your Experian report is calculated according to various factors. Your account balances and payment history affect your score. Legal action take against you and information from collection agencies are other factors involved. Even the size of your business is a factor in your Experian report. It provides a picture of the stability of your business for the benefit of potential creditors.
Your Equifax report is divided into three categories, just like the D&B report. The payment index is a measure of your payment history. The business credit risk score takes into account factors like size, available credit limit and nonfinancial transactions to predict the likelihood of future delinquency. The business failure score looks at similar factors to determine your company’s future viability.
If you are interested in knowing and improving your business credit score, it is a good idea to obtain all three reports and compare the information they convey. Once you confirm their accuracy, understanding these reports is a starting point for improving your business’s financial security.