business credit score

business credit scoreBy Rieva Lesonsky

Quick–what’s your business credit score? If you can’t answer that question, you’ve got plenty of company. If you answered, “What’s a business credit score?” you’ve also got plenty of company. According to research from Creditera, 60 percent of small and midsized business owners don’t know their business credit score—and 50 percent don’t even know that they have a business credit score.

Your business credit score is vital to obtaining funding, which makes these stats from Creditera even scarier:

  •  One in five small businesses have considered closing their doors in the last 12 months, and financial issues are prominently cited as a reason why.
  •  About one-fourth (26 percent) of entrepreneurs surveyed say they have avoided expanding their businesses or hiring more employees because trying to find the funding to do so is too frustrating.

Clearly, lack of awareness about your business credit score has big repercussions for your business—both today and in the future. Some 40 percent of small and midsized businesses Creditera polled don’t know their business credit score; those entrepreneurs envision business growth of less than 5 percent. However, nearly three-fourths of small and midsized business owners who do understand their business credit score have loftier goals, envisioning business growth of 5 to 20 percent.

They say knowledge is power—and clearly, knowledge of your business credit score, how to improve it, and how to protect it can give you the power to grow your business. So where should you start?

  • First, check your business credit score. Creditera allows you to check and manage your business credit score for free. You should also check your credit score at credit reporting agencies D&B, Experian and Equifax. If you see any errors, correct them. Continue to check your report regularly (at least once a year) for accuracy.
  • Don’t mix business and personal credit. Many small business owners charge business expenses on personal credit cards, and vice versa. This is a big mistake. Always use business accounts to cover business expenses—otherwise, your business won’t build its own credit report.
  • Pay your bills and vendors promptly. Just as with personal credit, making timely payments is of the essence in maintaining a good business credit score. Also ask your suppliers to make sure that they report your payment history to the relevant business credit scoring agencies, since not all companies will do this unless you ask.
  • Use credit wisely. You need some business credit to build a credit score. It’s best to have a few different business credit cards so that if one company suddenly changes terms or lowers your limit, you won’t get caught short. Also consider obtaining a business line of credit, using it and paying it back. It’s best not to use all your available credit—try to keep usage to 30 percent of your total credit available. This reassures lenders that you have plenty of wiggle room.