As you might know, your business credit score is very important to your business’ financial health. Your business credit score can determine your ability to get business loans, enter into leases, and make purchases—and since other businesses, banks, and lenders can check it at any time without your permission, you want to make sure that it’s accurate and reflects the way you do business.
A change in credit score could alter the course of your business for the foreseeable future—but how often does that happen? First, let’s cover some of the basics.
Technically speaking, it’s a number that usually (but not always) ranges from 1 to 100 that represents how dependable your business is in terms of paying off its debts. A high score is a shorthand way of telling creditors that your business has paid back lenders on time (or better, ahead of time). And, as we said, it can determine whether institutions should lend to the business, and how much they can lend.
Three main credit agencies are responsible for calculating your business credit score: Dun & Bradstreet, Equifax, and Experian. A variety of factors contribute to this score.
It’s essential to get an in-depth understanding of what goes into your credit score—the list is long and varied for each agency. Generally, the following items affect your business’ score:
It’s important to know that all of this information is publicly accessible to anyone. In other words, your competitors can do research on you and your score.
Another thing to keep in mind: While business credit reports are derived only from the accounts under the company name, business lenders and credit card companies will also check your personal credit.
If your business has fine credit but you personally are often late making payments or have judgments against you, the credit terms for your business could suffer.
The simple answer is, whether you’re credit is good or bad, business credit scores change all the time—essentially, it changes whenever new credit information is added to your report. Knowing what affects your business credit score can help you optimize your score and prevent any negative changes.
A change in credit score is dependent on a few things. The credit agencies all collect similar information on your business but may use different algorithms to determine a score, as well as collect the information at different points of time each month.
Just as you monitor your personal credit score by reviewing your credit reports periodically, it’s important to keep up to date on your business’s credit score by regularly reviewing its credit reports, too.
You can pay for these reports through the main agencies that create them—Dun & Bradstreet, Equifax, and Experian. These agencies will charge you for producing an individual report.
However, instead of paying for a snapshot of your credit score every year or even a few times a year, another option is to pay a regular fee for credit monitoring—some credit monitoring companies even offer this service for free. The three main agencies—Dun & Bradstreet, Equifax, and Experian—offer varying levels of this service at several price points, for what it’s worth.
By having consistent monitoring of your credit score, you can catch and address changes to your rating before they affect your ability to secure financing or purchase power. Some services will send you business alerts relating to bankruptcy, judgments, liens, charge-offs, new inquiries, and large score drops. You can review your credit file with unlimited access at any time, which helps when developing a long-term financial strategy.
And since it’s so important to make sure your business credit score is accurate, credit monitoring can help you identify business identity theft in the early stages by providing round the clock access to your business’ credit information.
Since your score can change so quickly, it’s important to stay on top of it and know what goes into it. That way you can be sure to keep up or improve your score as you do business. Don’t wait to start credit monitoring today!