Tag: credit score

Separating business and personal finances is not just an option, it's a vital step towards safeguarding your assets, building a strong credit foundation, and gaining control over your business's financial health.

Both businesses and individual consumers have credit scores that reflect how they’ve historically used credit. Lenders and others use these scores to help determine creditworthiness and make decisions based on what they see. Your Business credit score is based on different information than personal credit scores and use a different scoring system. Learn now to check your business credit score. How Do Business Credit Scores Work? Business credit bureaus use information from a wide range of sources to compile business credit reports, which are then used to generate business credit scores. Data in business credit reports may come from your business’s creditors; its vendors and suppliers; public records and court filings; and collection agencies. For instance, Experian business credit reports show data such as location and contact information, time in business, the company’s Standard Industrial Classification (SIC) and North American Industrial Classification System (NAICS) codes, annual sales and number of employees. It will also show any judgments, UCC filings or tax liens against your company and any accounts in collections. Finally, it looks at how you handle commercial credit payments on loans, credit cards, and bank or trade lines of credit. Each business credit reporting agency weighs the information in your credit report differently and uses its own unique method to calculate your credit score. For example, Experian calculates your business credit score based on: Credit: Number of trade accounts, outstanding balances, payment behaviors, credit utilization and trends over time Public records: How recent and how frequent any liens, judgments or bankruptcies are and how much money was involved Demographics: The number of years you’ve been in business, your SIC and NAICS codes and the size of the business Experian Business Credit Scores range from 1 to 100. As with consumer credit scores, higher scores signify better credit. Where Can I Check My Business Credit Score? You can check your Experian business credit score by purchasing a one-time copy of your credit report or signing up for business credit monitoring, including unlimited access to scores. Reasons to Check Your Business Credit Score Prevents fraud: Monitoring your business credit score can reveal potential fraud or identity theft. A new account you don’t recognize, an application for credit you didn't make, or inaccurate information could be a sign of fraudulent activity. Contact the credit bureau if you see anything amiss on your business credit report. Monitors business health: Your business credit score is an indicator of the financial health of your business. A good business credit score can open doors, giving you access to more credit, lower interest rates and better loan terms. Your business credit may be the deciding factor in whether you get approved for a lease or for trade credit. Regularly checking your business credit score gives you a sense of where your business stands and how successful your applications for credit are likely to be. Safeguards your personal assets: Without a good business credit score, you may need to personally guarantee business loans or use your personal credit score to apply for business credit. This could put your personal assets—and personal credit score—at risk if your business suffers a downturn and you can’t pay these bills. A good business credit score can help you get credit in your business’s name, protecting your personal assets. How to Establish and Build Business Credit Start establishing a business credit history by legally registering your business and getting an employer identification number (EIN) from the IRS. Open business bank accounts, leases, utility services and other accounts in your business’s name, rather than your own. You can begin to build business credit by making moves such as getting a business credit card and requesting trade credit from suppliers, then making your payments on time. For these payments to help your business credit score, you’ll need to work with companies that report to business credit bureaus. Not all of them do, but companies are often willing to do so if you ask. As with personal credit, paying your creditors on time is key to improving your business credit score. You should also check your business credit score regularly, making sure the information in your credit report is correct and current. Keep Your Business Credit Score Healthy Regularly monitoring your business credit score helps keep a pulse on the health of your business—but as a business owner, you already have a lot on your plate. For a convenient way to track your credit score, sign up for business credit monitoring services such as Experian’s Business Credit AdvantageSM. It provides alerts whenever your business credit score changes and early warnings of potential fraud to give you peace of mind. Plus you get unlimited access to your business credit report and score all year long. About the author Karen Axelton Drawing on 20-plus years of experience as a journalist, business magazine editor, and marketing copywriter, Karen Axelton specializes in writing about business and entrepreneurship. She has created content for companies including American Express, Bank of America, MetLife, Amazon, Cox Media, Intel, Intuit, Microsoft and Xerox.

There are two types of credit inquiry, hard and soft. How do hard and soft credit inquiries impact your business credit score? We explain the difference.

Paying down commercial debt — is paying one account and going delinquent on another a good idea? In this business credit answer, I want to talk with you about paying down commercial debt, and establishing your small business and gaining access to commercial credit. To do this, you need to focus on your commercial credit score. It's just like your personal credit score. You monitor it, you try to get it up, you pay your bills, and you make sure that everything is being reported to the credit bureau. Doing those activities will help your consumer credit score to go up. Same thing for your commercial credit score. It's looking at any type of commercial credit cards that you have, term loans, how you are honoring the debts that are there, and repaying them. This is what a lender uses to establish your repayment behavior and to look at how much additional funding they want to give to your small business. I had a friend that wanted to pay down some of the debt that they had for a small business, and they had two different accounts that had pretty high debt. He was asking me should I just pay down one of those debts, and let the other one go into delinquency for a while and then come back to that one and pay it down?  He figured that way he'd have that sense of paying one down quickly and get one out of the way. And then focus on the other one. Well, what I told him was that it's not just a single debt that your credit score looks at. It's over your whole portfolio of debt. And so, missing a payment or pushing a bill to the side can bring your credit score down and sometimes significantly. So, you look at your credit score and you see it go down maybe five or 10 points. With delinquency, it can bring it down up to 30 points. So it's a big drop. As you bring up your credit score, it takes a little while to regain ground you may have lost.  So you want to keep that propensity to pay, and that lender view of you in a very positive light. You can check your Experian Business Credit Score by purchasing a one-time copy of your credit report, or by signing up for business credit monitoring, including unlimited access to scores. Read our post on checking your business credit score for more information.

What is good business credit? See how a good business credit score can help strengthen and protect your business.

Business credit scores are vitally important to small businesses. In today’s competitive market, a faulty credit score can dramatically affect the bottom line of any business and can lead to higher interest rates, difficulty in securing loans, and potential problems with suppliers. Conversely, favorable credit history can serve as the linchpin to success. It not only can save a small-business owner a considerable amount of money, but it also can provide access to capital with which to grow the business. So, let’s do a quick review of some common business credit misconceptions. If I have a small business, I automatically have a small-business credit score. FALSE. If a business doesn’t have at least one tradeline and/or one demographic element (such as length of time the business has been credit active, how many employees, etc.), then a credit report and score are not generated. To establish a business credit score, you should ensure that your business vendors are reporting your payment history to the major credit reporting companies. This will help to build your commercial credit profile. There are no drawbacks to using my personal credit score, rather than a business credit score, when attempting to secure funding. FALSE. It’s true that many small-business owners fail to separate their business expenses from their personal expenses. However, the weakness of relying solely on personal credit is clear. If your business ever becomes at risk, your personal credit score becomes at risk as well. Anyone can request and view my business credit score. This is TRUE. Unlike personal credit reports, which are regulated and can be viewed only with the permission of the report holder, business credit reports are available to the public. This means that anyone — including potential lenders and suppliers — can openly view your business credit report. Given the public availability of business credit reports, it’s imperative to monitor your business credit score. There are things I can do to improve my business credit score. TRUE. It’s vitally important to be aware of possible inaccuracies or negative credit data on your credit file, should they exist. As the business owner, you may request that the credit reporting companies correct any mistakes to ensure that your credit file is accurate. By simply increasing your awareness of the factors that drive your current company credit score, you can begin to effectively manage your credit behavior. As always, the best thing that you can do is pay all financial obligations on time.