Personal credit scores are well known, but not many would be aware of business credit scores. These are similar to the popular scores like FICO, but are meant to measure the creditworthiness of businesses. The scores are calculated using varying algorithms based on the business credit report, and used by lenders as part of the loan approval process.
The business credit score indicates how sound a business is in terms of risk and ability to repay a loan. Like a FICO score, it shows how timely a business has been in repaying its dues. The numerical range of a business credit score is between 0-100. The other difference is that a business can have eight credit scores, with their own rating scale.
The business credit report is produced by Dun & Bradstreet, Experian, Equifax and FICO. However, the reports don’t come free and require payment for access. The personal scoring algorithms aren’t based on standards, but business scores are based on public information which can be accessed on payment.
A typical business credit report will have the company accounts, and not personal accounts. But loan companies may still want to see personal credit scores and reports as part of the loan process.
Business credit scores can make it easy to get financing for small businesses. A good business credit score means the likelihood of getting a loan are high, or the terms of a line of credit can be more favorable. A good score can also mean insurance rates could be lower, which is good for growing businesses when they go for insurance. A good business credit sore can also increase borrowing power.
A small business can look into its business credit report and keep it clean to increase chances of getting a loan. There are many guides that explain how to check your business credit score, and these can be consulted for more information.
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