While it’s not the only factor that impacts your loan application, your credit score provides potential lenders with a snapshot of your borrowing history and your company’s financial health. Typically, higher scores may improve your odds of approval. They may also give you access to lower interest rates.
If you’ve never applied for a loan, or you’re not sure that your credit score is adequate, these five questions can help you better understand your score and how to improve it.
5 questions about your business credit score answered
Question 1: “If I have a small business, do I automatically have a small business credit score?”
Answer: No. There is a difference between your personal credit score and your business credit score. Before you can get a credit score for your business, you’ll need to:
- Incorporate your business.
- Apply for an Employer Identification Number (EIN) from the IRS.
- Open a dedicated business bank account to separate business and personal finances.
- Register your business with the major business credit bureaus, such as Dun & Bradstreet, Equifax Small Business, and Experian Business.
- Apply for a business credit card or small business line of credit and use it responsibly.
- Establish trade lines with vendors or suppliers that report payment history to business credit bureaus.
There are multiple types of small business scores. For instance, Dun & Bradstreet® uses a scale that goes from 0 to 100. Equifax® provides multiple scores, including credit risk, payment index, and business failure.
While some lenders may also consider your personal credit score, you need to establish a credit score for your company. Once you’ve taken the steps to establish your business’s credit, pay bills on time, and use your credit responsibly to boost your score.
Question 2: “Can I just use my personal credit score instead?”
Answer: No, you should not use your personal credit score instead of your business score.
While lenders may consider your personal credit score, especially if you’re obtaining funding for a startup, there are several reasons to keep your business and personal credit scores separate:
- Protect your personal credit score, especially if your business is sued. Without a separate business credit score, your personal assets are at risk.
- Isolate your personal savings in the event your business has to close.
- Make it easier to identify deductions for tax purposes.
Having a dedicated business credit score adds a layer of protection between your personal finances and those of your company.
Question 3: “Can anyone request and view my business credit score?”
Answer: Yes, business credit scores are typically accessible to the public.
Unlike personal credit reports, which are protected by consumer privacy laws and usually require your permission to access, business credit reports are not regulated in the same way. Most parties must purchase a report or subscribe to a credit bureau’s service to view it. However, they typically do not need your explicit authorization to check your business credit profile. Because of this, maintaining accurate records and a strong payment history is important since potential lenders, vendors, and partners may review your business credit as part of their decision-making process.
Since people can access your business credit score at any time, it’s important to take steps to keep it high.
Question 4: “Is there anything I can do to improve my credit score?”
Answer: Yes, you can take steps to improve your credit score.
Here’s the good news about your business (and personal) credit score. If it’s lower than you want it to be, and you’re worried that it’s going to negatively impact your chances of securing a loan with a lower interest rate, there are certain things you may be able to do to improve it.
- Pay your bills on time, every month.
- Try to keep your credit accounts open, even if they’re not very active.
- Review your business’s credit reports monthly to look for inaccuracies that may lower your score.
- Be responsible when using your credit.
It’s important to understand that your business’s credit score isn’t the only factor that lenders evaluate. They may also look at your overall financial performance, your personal credit history, and your company’s overall credit profile. When they combine these with your business credit score, lenders typically gain a better understanding of your creditworthiness.
Question 5: “Can’t I just check my credit score yearly?”
Answer: No, you should check your business credit score far more often.
Errors can appear on your credit report at any time, so checking it monthly ensures that you catch mistakes, including inquiries you want to remove or fraudulent activity. It also allows you to maintain a watchful eye on your company’s financial health.
Credit monitoring has never been easier than it is today. Thanks to the digital tools available, you can quickly check your business credit score from any device.
Know your numbers: Master your business credit score
Your credit score is one of many factors that lenders will consider when determining whether to offer you financing. See if you pre-qualify for a business loan today.
FAQs
How do business credit scores affect loan approvals for small businesses?
Business credit scores help lenders evaluate how reliably a company has managed financial obligations in the past. A stronger score may increase the likelihood of approval and can sometimes lead to more favorable loan terms. Lower scores may signal higher risk and prompt lenders to request additional documentation or guarantees.
Which credit bureaus track business credit information?
Several major credit bureaus collect and maintain business credit data. The most widely used include Dun & Bradstreet®, Experian Business®, and Equifax Business®. These organizations gather information from lenders, suppliers, public records, and other financial sources to build a credit profile for each business. Because each bureau may use different data and scoring models, a business can have multiple credit scores at the same time.
Can my personal credit score affect my business credit or loan eligibility?
Yes, personal credit may influence business financing, especially for small businesses. Many lenders review the owner’s personal credit history alongside the company’s credit profile, particularly if the business is new or has limited credit history. Strong personal credit may strengthen an application while weaker credit can lead to additional scrutiny during underwriting.
How can I check or monitor my business credit score?
As a business owner, you can check your credit reports directly through the major business credit bureaus that track commercial credit data. Each bureau offers reports or monitoring services that allow businesses to review their credit profile and track changes over time.
