Whether you’re launching a new venture or scaling existing operations, your business credit score helps determine the availability of financial opportunities that can take your company to the next level.
Much like a consumer credit score affects your ability to purchase your dream car or vacation home, a business credit score holds the key to securing loans, negotiating favorable terms with suppliers, and maintaining reputable standing as a business. And just like your consumer credit score, your business credit score isn’t set in stone — it’s constantly evolving based on your financial decisions and credit activities.
Read on to explore how to check business credit scores, why this number is essential to know, and tips for monitoring it.
A business credit score evaluates a company’s creditworthiness, which creditors and suppliers use to decide whether to extend credit to a business, and on what terms. Think of it as a financial report card for those who might do business with you.
Unlike personal credit scores, which assess individual financial stability, business credit scores are more directly focused on predicting credit delinquencies and managing financial risk. A lower score indicates a higher risk, which can lead to higher interest rates or outright credit denial.
Here are the key factors that affect a business credit score:
Business credit scores are assessed through multiple scoring systems, each with its own scale and criteria. You may have heard of these two common ones: Experian’s Intelliscore Plus and Dun & Bradstreet’s PAYDEX Score.
While Dun & Bradstreet’s PAYDEX Score still ranks businesses on a scale from 1 to 100, Experian updated its scoring model in 2021 to align more closely with the standard consumer credit scoring range of 300 to 850. Other business credit reporting systems may follow different rankings — though generally, the higher the number, the better the score.
Here’s how the new Experian Intelliscore Plus business credit score scale breaks down:
Businesses within this range are considered high risk, indicating a higher likelihood that they might default on obligations. This means there’s a significant chance the company will fail to meet its financial commitments, such as paying back loans on time.
If a business’s credit score falls within this range, there are strategic steps it can take to rebuild its credit and restore its financial standing. Until then, though, it will need to be prepared for higher interest rates and limited financing options. Businesses in this range may also require collateral (such as real estate, equipment, or inventory) to secure any form of credit.
This range suggests a moderate-to-high risk of default, which means businesses may struggle with securing favorable financing terms. They may also have to undergo more stringent scrutiny during the credit evaluation process, which can affect the ease and terms of potential credit approvals.
Medium-risk businesses may be offered interest rates slightly above the prime rate or credit limits that are more conservative than those offered to companies with higher credit scores.
Companies in this bracket are generally viewed as stable by creditors, which means they can enjoy more favorable financing opportunities with reasonable terms, increased credit limits, and more flexible repayment options.
If you’re in this business credit score range, congratulations — your business is in excellent financial health. Businesses in this range are more likely to qualify for the most favorable terms on loans, credit lines, and other financing options. They may also benefit from expedited credit approvals and reduced requirements for documentation.
Your business credit score is more than just a number — it can also be a gateway to opportunity and stability. Understanding and monitoring it can help ensure that your business is ready for both challenges and growth.
Here are a few benefits of knowing where your business stands:
Lenders, suppliers, and other businesses can use numerous business credit reporting systems to assess a company’s creditworthiness. Some well-known options include:
It’s important to note that most providers require payment before giving you access to your detailed business credit reports. Some credit agencies might also require you to register and provide business information before you can see your scores. This process helps accurately track businesses’ credit activities and ensure that the provided information is up to date.
Improving your business credit score can be highly beneficial to the survival and long-term growth of your company, especially if you need extra resources to launch new products or enter new markets.
Here are some practical steps that can help establish a business’s credit:
Don’t stop there — get more tips on how to build business credit.
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
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