How to Check Your Business Credit

A business credit score is extremely important if you are trying to secure financing. Before applying for funding, checking your business credit is crucial. Today we will discuss what a business credit score is and how to run and check your credit score.

What Is a Business Credit Score?

A business credit score measures how creditworthy a business is and lets lenders know how risky your business is. Lenders will always look at your credit score because it lets them know how much you can afford to borrow and how likely you can pay it back.

Although a business credit score works similarly to a personal credit score, they are different. A business credit score uses an employer identification number (EIN) and a personal credit score uses your Social Security Number (SSN). They each also have different scoring ranges. A personal credit score used the FICO score which ranges from 300 to 850 whereas a business credit score ranges from 0 to 100.

When to Check Your Business Credit Score

There are several occasions in which you should check your business credit score.

  • When you are considering applying for a loan and approaching a lender
  • When you are attracting investors
  • When you are negotiation with a potential supplier
  • When getting ready to sell your business

The sooner you start to monitor your business credit, the sooner you can build a healthy credit history that will allow to secure financing in the future. There are other reasons why you should check your business credit score regularly.

  • Errors can happen: if you do not check your score, you may miss out on some errors that can affect your score. It may get mixed up with another business or a vendor or lender can report incorrect information by accident.
  • Credit scores change: your credit score changes each time new information is reported.
  • Identity theft: fraud and identity theft can occur and will result in poor information on your report. If you see any suspicious activity, make sure to report it right away.

How to Improve Your Business Credit Score

There are steps you can take to improve your credit score to increase your chances of getting funding for your business.

  • Set up automatic payments to make sure that you pay your bills on time.
  • Spending at least 25% or less of your credit limit to lower your credit utilization ratio.
  • Diversifying your credit mix by using a business credit card or taking out a business loan.
  • Review your credit report and check for any errors and inaccuracies that need to be fixed.

How to Run a Credit Check

When you are ready to run a credit check for your business there are two resources you can use. You can use a major credit reporting bureau which charge a fee or use secondhand business credit reporting resources.

There are three main credit reporting bureaus which are Dun & Bradstreet’s PAYDEX, Experian, and Equifax.

Dun & Bradstreet is the largest business credit reporting agency and offers a range of credit report options. The scale of the credit score is from 0 to 100 and it indicates how often a company pays its suppliers and vendors. A high number is preferred as it means you are likely to repay your debts on time. A low number shows that there is a high risk that you are going to fail repaying on time. Dun & Bradstreet uses an identifying system known as D-U-N-S Numbers which you can create for free and it will help establish your PAYDEX score.

Experian offers low cost credit reports and also tracks personal credit scores. They determine credit risk by looking at data based on a company’s information including public record filings, collections, and business background.

Equifax also tracks personal credit like Experian, uses several scoring systems that include a payment index that is similar to Dun & Bradstreet’s PAYDEX score, a business credit risk score that predicts how likely a business will become delinquent on payments, and a business failure score which evaluates how likely a business will face bankruptcy.

The Bottom Line

As a business owner, monitoring your business credit is important. By checking it often, you can take the necessary steps to improve it so you can increase your chances of securing a loan or another type of financing.