Importance of a business credit score

New business owners need to work on building their business credit score, which is similar to a personal score.

According to popular money-centric blog Nerd Wallet, a business credit score is measured by a range of numbers that indicate how creditworthy a business is and the higher the number, the better. The ratings are generated by the three major credit bureaus: Dun and Bradstreet, Experian, and Equifax and typically range from zero to 100 rather than 300 to 850. Just like the personal FICO score, the single most significant influencer of this score is the ability to make on-time payments to lenders who regularly report on that history. The score will typically only be affected by accounts in the business’s name, but it should be noted that many small-business lenders will still take a look at an owner’s personal score as well.

Aside from payment history, these bureaus use other information to determine the overall score of a business. Experian, for example, uses credit information from product suppliers and money lenders, any filings from the courts, public records about the company, and any open or past collections. Taking things a step further, they also check current loan balances, liens, bankruptcies, and judgments against the business as well as how large and how old it is. That’s a lot of things to consider, and for a small business owner, it is important to remember that these agencies are watching every financial move they make and each one can have ramifications long into the future.

Just like a personal credit score, it is essential to check a business credit score frequently to see which direction it is moving as well as to monitor for fraud and inaccuracies that need to be corrected. Unlike the personal score, however, the major bureaus don’t hand out the information for free, and there will be a fee involved ranging from $39.95 to $99.95 each time it’s checked.