Helpful education and tips for how to improve your company's small business credit score
First, Business credit scores differ from personal credit scores
Many small business owners don't realize that business credit scores are distinctly separate from personal credit scores. Your business credit score has no impact on your personal credit score, and vice versa.
A business credit report shows the same types of information as a personal credit report, but it is specific to a business's debt repayment and public records, such as bankruptcies or tax liens.
The objective of the Experian Business Credit Score (Intelliscore PlusSM) is to predict seriously derogatory payment behavior. Business credit reflects your company's image to potential lenders and business partners. Yet, unlike personal credit — which can be viewed only with the permission of the report holder — business credit scores are made available to the public. Anyone can view your business credit score for any reason.
Furthermore, business credit is expressed with a different numerical range than personal credit. Business credit scores provide a quick view of a company's risk potential based on a scale of 1 to 100 — the higher the score, the lower the risk.
|Business Credit Score Range||Risk Class||Risk Description|
|51-75||2||Low to Medium|
|11-25||4||Medium to High|
Then, Understand the main factors that influence a business credit score
Credit reporting agencies such as Experian collect credit data from a wide range of sources. This information is used to create a score that illustrates how your business has historically met its financial obligations, which helps lenders decide whether to take a chance on hiring your company.
There are a number of factors that could influence your business credit score either positively or negatively.
Those main factors include, but are not limited to:
- The number of trade experiences, total balances outstanding, payments habits, credit utilization and trends over time.
- The presence of derogatory public records on the business profile, such as collections, liens, judgments, and bankruptcies.
- The status, recentness, frequency, and dollar amounts of any applicable liens, judgments or bankruptcies
- An increased trend in slow payment of obligations.
- An increase in the number of business credit inquiries or applications that are generated by the business or owner.
- Years in business, line of business, size of business, and other demographic data.
To learn more about what can impact a business credit score, try Experian's business score planner
Additionally, Small business accounts paid on time can improve your business credit score
Paying off financial obligations according to the agreed-upon terms is the first and most important step in establishing a good business credit score. All business accounts — not just loans, but also recurring expenses like utilities and leases — should be established in the company's name, and business owners should also ensure that their business vendors report their payment history to a business credit agency.
When a small business lender reports payment history to Experian, it can help improve a business credit profile and increase business credit. The reported information can either help establish a new profile or strengthen an existing one by providing additional trade activity. If a business pays that loan on time, it can further strengthen their business credit profile by showing that the business is managing its — payment obligations responsibly — and thereby positioning itself as a better credit risk for future lenders.
Finally, Be proactive by staying on top of business credit changes
We recommend that small businesses regularly monitor their business credit score for risk changes, and proactively manage it to maintain the lowest risk potential. Managing the factors that drive your score can make a positive impact. This can lead to more opportunities to grow your business, ranging from gaining capital to gaining clients.
Take good care of your small business name and reputation. Update and correct information as your business grows. Small business owners can do so easily using convenient buttons at the bottom of the report
When you take the time to build and maintain business credit history, you'll be building your business reputation and ability to succeed.
Get your business credit score