Just like individual consumers, businesses can also be issued credit scores. The numbers help to determine the creditworthiness of the business and whether it is able to pay back loans. Good business credit scores mean that your company will have a better chance of getting a loan, business credit card, or term financing to improve cash flow and drive growth.
Factors That Determine Credit Score
There are four major reporting agencies that issue small business credit scores. These are Dun & Bradstreet, Experian, Equifax, and FICO. Each of the reporting agencies uses different scales and methodologies to determine your score. However, they all depend on the payment history a company has had with its creditors, suppliers, and lenders. This is why businesses should have accurate records of timely payment.
The major determining factor for Dun & Bradstreet is the promptness with which a company makes payment to creditors. With Experian, your score will depend on payment history, how frequently you get derogatory remarks and credit utilization. Equifax determines business credit scores using the company size, age of credit, and credit limit. Lastly, the age of the business, number of employees, revenue and assets, personal credit history, and data from other agencies are the major determining factors for FICO.
Reasons to Check Your Credit Score
Checking your credit score will help you make the right financial decisions for your business. You will also be in a better position to identify any mistakes in your credit report and get the reporting agencies to respond accordingly. Some of these mistakes may be as a result of misattributed information or clerical errors. Since lenders and creditors can turn you away as a result, you should check your credit score regularly.
The importance of improving and maintaining good business credit scores cannot be denied. Today, apart from traditional financial lenders, there are many more options that you can consider. Ambition Funding Solutions offers a wide range of commercial finance services to help grow your business. If you wish to learn more about our services, kindly contact us today.