How To Read Your Business Credit Report

Believe it or not, a lot of business owners don’t realize they have a business credit score separate from the standard FICO score. If you use a credit card in your company’s name, you have a credit report that’s just for your business. This is good news if you’re looking to keep your cash flow steady and grow your company, but you have to know what the score means and how to actually read the numbers on the report.

 

What the Score Represents

 

There’s nothing particularly mystifying about this number or system. Just as you have a personal credit score that illustrates your financial standing and creditworthiness, you have a credit score indicating how your business handles its money and debt repayment. If you’re an entrepreneur, having solid business credit can be just as important as having a strong FICO standing. When you need to buy equipment, lease property or take a loan, you want to show that you have good business history and you’re a trustworthy partner. The credit associated with your company is usually the first place lenders will look, so you want to have this number as high as possible.

 

How the Score Is Calculated

 

It’s important that you understand what goes into your business credit score, so that you can adjust your spending and financing practices as necessary. There are three different major credit bureaus that determine scores, and each has a slightly different tactic for crunching numbers. However, the ending calculations are generally the same, with data being pulled from various third-party vendors to create a final score. The credit bureaus assume responsibility for properly vetting the information used to formulate your score, and every so often consumers have to contest a faulty score based on bad information. This is a rare scenario, but it’s one you should consider if you feel like the credit score you receive is not representative of your actual business dealings.

 

Accessing Your Score

 

Unfortunately, knowing your company’s score comes at a cost. You’ll have to shell out money to either Dun & Bradstreet, Equifax or Experian, the three major bureaus. While you might not want to pay for this knowledge, it’s worth doing at least once a year so you don’t get blindsided when a bank turns down a loan request.

 

Your business credit is an important part of your company’s financial health, so you should take whatever steps are necessary to keep this number in a respectable range. Understanding the mechanisms of credit scoring is a great way to ensure you’re making the right choices.

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