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Business Credit Score Versus Business Credit Reporting
November 28, 2019
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Business Credit Score Versus Business Credit Reporting

Both your business credit score and business credit report play a critical role in determining your company’s ability to obtain business financing. 

Given how important financing is to growing your business, you must familiarize yourself with  business credit scores and credit reports. Doing so will help you as the business owner make informed decisions to position your business for sustained, long-term success.

About Business Credit Scores

If you’re familiar with personal credit reports, it won’t be hard to understand business credit scores. Just like personal scores, business credit scores are what traditional lenders use to determine if they’ll give you a loan approval. Generally speaking, the higher your score, the more willing lenders will be to approve you for business financing. 

Of course, there are differences in checking your business credit and personal credit scores. Business credit scores are measured on a different scale than personal scores. Typically, the scores range from 1,000 to 1880 or zero to 100, depending on the credit scoring model. This score is what commercial lenders use to decide whether you have a high enough credit score for a business loan.

In addition, while business credit scores depend on some of the same factors as personal scores, they also depend on some business and industry norms. For example, it’s normal for construction businesses to pay bills when they are paid by clients. Due to this, homebuilders are given more time to pay bills without it hurting their credit score.

Still, when it comes to earning a good business credit score, the same good habits that you have for building your personal credit score hold true. The first step is to build credibility by opening a business credit card account or obtaining a business loan.

Beyond that, you should ensure that you’re being diligent about your payment history. This will entail paying bills on-time and in full. You should do this while also keeping your overall credit utilization as low as possible. When it comes time to apply for financing, you can use your great score as leverage for better terms and to avoid higher interest rates.

Business Credit Reporting

The easiest way to explain the relationship between business credit reporting and your business credit score is to think of a grade point average (GPA). Just as your GPA is considered on a college application, your business credit score is part of your business credit report.

Reporting with calculator and numbers

The three major commercial credit bureaus are Experian Business, Equifax Small Business, and Dun & Bradstreet. Each one of these agencies collects information which they use to create your business credit report. If you review this Experian business credit report, you’ll notice that credit scores are only a piece of the puzzle. 

While your business credit score is very important, lenders will also evaluate the other information in your business credit reports. This includes details about your company’s history, business plan, organizational structure, annual revenue, and more. As mentioned earlier, your creditworthiness depends, in part, on information about your business and industry—this is where the credit bureaus report those details. 

Since anyone can access these public records, including potential business partners, it’s critical that you know what’s on your report. In addition to preventing you from obtaining financing on good terms, that information can negatively affect your business’s reputation. This makes it especially critical to pay attention to what’s on your report so you can quickly report any errors.

As you can see, your business credit score and business credit are related, but not the same.  

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].