Understanding Your Business Credit Score

How much do you know about your business’s credit score?

If the answer is “not much,” you’re not alone – Entrepreneur magazine reports that less than 10% of all business owners understand how their business credit is established. However, if you want to access capital – be it a loan or simply longer payment terms from a vendor, it’s important to understand your business credit profile. 

Credit ScoreLet’s start with the basics. Your business credit score, sometimes referred to as “trade credit,” is a rating that assesses your business’s ability to pay its debt. The score is compiled from credit obligation information, legal files, and background information pulled from public offices.

Other key information that goes into your score includes the number of lenders (either traditional banks or vendors) you have worked with, the amount of credit they have extended to you, and how prompt you are at paying them back.

Your business credit score shouldn’t be a mystery. You can easily access your business credit score by turning to any of the major credit bureaus. Keep in mind that business credit scales vary by bureau – unlike personal credit, which is scored on a consistent scale. Here is a breakdown of the Experian 0-100 scale and what it means for your business’s financing potential:

  • 0-15: High Risk – Likely to encounter problems obtaining small business financing. You should take action to rebuild your business credit.
  • 16-30: Medium Risk – Moderate risk to lenders 
  • 31-80: Good Credit – Most lenders looking at business credit should see no problems
  • 81-100: Excellent Credit – Your business credit is in great shape 
     

In most cases, the longer you’ve been building your business credit, the better your score will be. However, creditors aren’t required to report your payment behavior, which can increase the time it takes you to establish your business credit. Some business owners mistakenly go years without establishing business credit because they haven’t been borrowing, or those that have extended them credit are not reporting to the credit bureaus.

Besides your business credit, other factors are considered when applying for a small business loan. Your industry, time in business, revenue, and even your personal credit can affect the outcome of your loan application. Still, it is important to understand the role your business credit score plays in your loan application process.

Find out more about your business score today by checking out any of the major business credit bureaus:

About the Author

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OnDeck offers business loans and business lines of credit to small businesses across the United States. OnDeck analyzes businesses differently than traditional lenders, which means that they can make more loans than traditional lenders, and they can fund businesses within hours or days – not weeks or months.  To date, OnDeck has delivered over $1 billion to small businesses nationwide.