How Your Business Credit Score Is Calculated
There are many ways to improve or harm your business credit score. Having a high score can significantly improve your chances of receiving financing for your business. If you aren’t sure what your score is, or if your business even has a score, learn how you can determine, raise and use your score today.
Determining your score is based on a few factors. First, your business probably doesn’t have a credit score if you’ve never opened a business credit card or received a business loan. If you have, your credit limit, payment history and years in business are all major factors in determining your score.
Once you’ve learned your score, discover how you can use it to boost your company. The most important benefit to having great credit is your ability to receive a loan with competitive terms. From interest rates to credit limits, there are many areas that can be dramatically improved with a high score. Some of your clients may even choose your company over a competitor due to your score. A high score can help promote your company as financially stable and responsible.
If you don’t have any business credit, or if your score is lower than you’d like, there are ways to improve it. First, you must have a legal business in order to receive credit. This means either an LLC, S-corp or other entity. Next, you need to have a separate bank account for your business, which only handles your business assets.
Once you have an account, it’s time to open lines of credit. From credit cards to asset-backed loans, having lines of credit open is a great way to improve your credit score. Be sure to make payments on time and not overspend on credit cards.
Although you receive free yearly scores for your personal accounts, you’ll need to pay to learn your business score. Be sure to check it consistently, since there could an error that is causing your score to drop dramatically.
Enjoy the flexibility that comes with having lines of credit with great terms. Not all businesses have the credit limits they need to respond to emergencies or capitalize on growth opportunities. Work hard to improve your score so that you can respond quickly to any need that may arise as your business grows. Once you know how your score is calculated and how to improve it, you’re on your way to benefiting from a healthy credit score.