Understanding and managing your business credit score

A business credit score is a vital metric that reflects the creditworthiness of a company. It is essential for entrepreneurs and business owners to understand and manage their score effectively.

In this post, we'll explore how to check your business credit score, how to run a credit check on another company, what a business credit check shows, the significance of a good credit score, the implications for new businesses, and the benefits of being aware of your business credit score.

Checking your business credit score is an important step to manage your company's financial health. Here's a step-by-step guide on how to do it:

Identify the major business credit bureaus:
The main bureaus that track business credit scores are Creditsafe, Equifax Business and Experian Business. Each of these bureaus has its own method for calculating credit scores.

Register with the bureaus:
Decide which credit bureau you would like to go with, you can sign up to multiple bureaus. Once you receive your credit report, review it for accuracy.

Understand your score:
Each bureau has a different scoring model, but generally, scores range from 0 to 100, with higher scores indicating better creditworthiness.

Familiarise yourself with what factors influence your score in order to improve or maintain it.

Monitor regularly:
Regularly checking your business credit score can help you understand how your financial actions affect your credit and identify any potential issues or errors.

Correct any inaccuracies:
If you find inaccuracies in your report, contact the respective credit bureau to dispute the information. This can help improve your credit score if incorrect negative items are removed.

A business credit check reveals a variety of information that can be crucial for lenders, suppliers, investors, and other interested parties to assess the creditworthiness and financial health of a business.

A typical business credit report should include information such as your company’s payment history, credit utilisation, length of credit history, public records (like bankruptcies or liens), and demographic information about your business.

Typically, business credit scores range from 0 to 100, with scores above 80 considered excellent. However, the definition of a "good" score can vary depending on the scoring model used and the specific requirements of lenders or suppliers. Anything below 50 is usually considered a poor credit rating.

New businesses may not have a business credit score initially. Establishing a business credit history takes time and involves activities like obtaining a business credit card, working with vendors that report payments to credit bureaus, and ensuring bills are paid on time.

Access to better financing terms: A good credit score can qualify your business for better interest rates and loan terms.

Building trust with suppliers and vendors: Companies are more likely to do business with you if your credit score is high, ensuring them of your payment reliability.

Separation of personal and business finances: Understanding and improving your business credit score helps in maintaining a clear distinction between personal and business finances.

Improved planning and growth opportunities: Knowing your score allows you to plan for future financing needs and leverage credit for growth.

In summary regularly monitoring and understanding your business credit score is crucial for maintaining financial health and fostering growth. It not only aids in securing better financing but also plays a key role in establishing credibility in the business world. As a business owner, staying informed and proactive about your credit score is a smart strategy for long-term success.

We understand the unique challenges that small businesses face. We always look at the whole story when considering an application, a far cry from the traditional, inflexible SME finance of the past.

mcl finance has helped hundreds of businesses to survive, thrive and scale - apply today.