What is Business Credit Score, and How Does it Work?

What is Business Credit Score, and How Does it Work

You might have been bombarded by the term business credit score while applying for a loan for your business, and that’s why you’re here!

A business score provides loan issuers, credit agencies, and vendors or suppliers insights on how trustworthy your business is when borrowing money. Similar to your personal credit score, a higher business credit score indicates you’re more reliable.

Keep reading this blog if you are a business owner, want to get a loan, learn more about business credit score, improve your business credit score and discover its benefits.

What is a Business Credit Score?

As the name indicates, a business credit score is related to businesses instead of individuals. It helps loan agencies determine how trustworthy you are in borrowing money. The credit score of a business is determined by leveraging its financial details from a business credit report.

The report includes details about your business, including historical data, the number of employees, past payment history, amounts owed, account information, and more. Generally speaking, business credit scores are ranked on a scale of 0 to 1200.

For quick loan approval, it is essential to have a strong credit profile. Do you want to know how a strong credit score can help your business?

Benefits of Building a Strong Business Credit Score

The benefits of building a solid business credit score are numerous. Here are some ways a strong business credit score can help a business: –

  • Quick Access to Financing: With a good business credit score, you can get a business loan at a lower rate quickly and won’t have to sign a personal guarantee that makes you personally liable.
  • Lower Insurance Policy Rates: For growing businesses, insurance rates are pretty higher, but if you build a strong business credit score, you may get an insurance policy at relatively lower rates.
  • Personal Finances are Separate from Business: Your business credit won’t affect your personal finances and vice versa. It will also come in handy while filing your income taxes each year. Simply put, your assets aren’t leveraged against you if your business gets into financial issues.

Ways to Improve Your Business Credit Score

Improving the credit score of any business involves the same steps you would take to boost your personal credit score. If you want to improve your business credit score, consider taking the below steps: –

  • Pay Bills on Time: You should pay all your business expenses and bills on time to improve your business credit score.
  • Use Credit Responsibly: Building a solid business requires will require time; you have to borrow money and pay it on time and on good terms to achieve a strong credit score.
  • Never Max Out Your Credit: According to experts, you should keep your credit card usage and other lines of credit below thirty per cent for the best results.
  • Monitor Your Business Credit Score: Keep an eye on your business credit score just like you monitor your personal credit score for updates and changes.

On the Final Note

A business credit score provides insights to lenders on how trustworthy you are when borrowing money. You must build a strong business credit score to get a business loan quickly. The ways of improving it are mentioned in this blog; you can follow those steps, build a solid credit score, and ensure you don’t get into trouble or struggle to get a loan for your business. For more information on how to improve your credit score or stay on top of your finances, you can contact expert accountants of KPG Taxation.

Consulting with KPG Taxation

Focus On Growing Your Business, Leave The Accounting On Us!

  • Income Tax : File your taxes & get the best claims & returns.
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  • Business Advisory : From company set-up to payroll, we handle it all.