We all know the importance of regularly checking our personal credit score; but it’s equally important to monitor your business or commercial credit score as well. A business credit score can affect your ability to secure credit or loans, and can influence your interest rates. It’s important that you check your report regularly to ensure it contains up-to-date information and that the information is correct. Here’s what you need to know about your business credit report.

What your business credit report means, and what score to aim for

Your business credit score is a numeric representation of your company’s creditworthiness. It is an indication of your company’s credit risk and can affect your ability to obtain credit or a loan. It is based on a variety of criteria, including:

  • Number of reported business credit transactions
  • Outstanding balances
  • Payment history

Most business credit scores will range between 0 and 100; however, determining whether your credit score is considered “good” will depend on the credit bureau:

  • Experian: Aim for a credit score between 76-100.
  • Dun & Bradstreet PAYDEX: Aim for a credit score between 80 and 100.

Factors affecting a commercial credit score

Credit reporting agencies such as Experian calculate your business credit score by collecting credit information from suppliers and lenders, legal filings, and company background information from independent sources such as public records and collection agencies. Factors that affect your credit score include:

  • Payment history: Do you have a history of on-time payments? Have you defaulted on any payments with suppliers?
  • Risk associated with your business type: If your company is involved in real estate investing, auto sales, travel, transportation, money lending, or if you own a restaurant, you’re considered high risk.
  • Industry sector: Some industries that are considered high risk include agriculture, cannabis, construction, cryptocurrency, and others.
  • Years in business/age of your credit profile: The longer your credit history, the more established your business appears, which can have a positive impact your credit score.
  • Number of inquiries: When you apply for credit, the lender will request your credit report. These inquiries can hurt your score.
  • Collections and liens: Collection accounts and tax liens on your credit history in the last seven years can lower your business credit score.
  • New lines of credit opened: Are you stretching yourself too thin? What is your income-to-debt ratio?

Credit scores change constantly. They are influenced by recent transactions, any defaults on payments, bankruptcies, and more. Monitoring the information on your credit report will allow you to see who is inquiring about your business and quickly identify any suspicious or erroneous reports against your business. For example, if you notice that a business has reported incorrect information related to your business, you have the right to dispute that claim. Your business credit report also could indicate fraud or identity theft.

One of the biggest benefits of monitoring your business credit score is the opportunity to develop a strategy to improve your company’s credit by examining your file’s strengths and weaknesses.

Need help managing your commercial credit risk? MSCCM financial experts can assist you. Contact us today.