The 5 Keys to Improving Your Business Credit Score

We’re in the middle of a rare kind of “Goldilocks” window for lending — the Federal Reserve is still keeping rock-bottom interest rates following the recession, but the economy’s improved enough for lending institutions to extend credit to many new business owners.

However, you could be missing out on this excellent lending environment because of one pesky factor: your business credit score.

Although similar to your FICOs and VantageScores, business credit scores have a few distinct differences from their consumer counterparts. We’ll explore five tips that’ll help maximize your business credit and help you gain access to the best loan terms possible.

If someone told you today that you had a business credit score of 78, how would you feel? Happy? Disappointed? Or do you just have no idea what to think?

Consumer credit scores will fall between 300 (bad) and 850 (excellent). However, business credit scores typically use a 0 to 100 scale, with scores of 75 or greater considered optimal.

A business credit score will typically contain three types of information, according to credit reporting bureau Experian :

If you’ve got a score below 75 — or just want to get as close to 100 as possible — you’ll want to understand what’s going on with your business credit first. With your business credit report in hand, you’ll be able to see what lenders see when you apply for loans — all the positive and negative marks against your business, as well as pertinent demographic information.

Just like personal credit reports, it’s good to review your business’s credit periodically for errors. Credit reporting is not infallible, and you could end up paying for a mistake that was no fault of your own. Experian and D&B (which we’ll discuss more in a moment) are the biggest players when it comes to business credit reports, so chances are they’ll have the information you need.

If you haven’t already, you’ll want to gain an intimate understanding of how money is flowing into and out of your company. Once you’re familiarized with your books, make sure you have the right infrastructure in place to handle all of your accounts in the most efficient manner possible.

Debt isn’t necessarily a bad thing — having some on your books won’t be bad for your credit profile, much in the same way consumers with a little credit card debt aren’t penalized for not having a $0 balance. Rather, holding some debt shows you’re an active borrower.

However, if your debt load seems unusually large for a business like yours, or if you’re near/beyond the limit for your credit cards, then don’t be surprised when you see a less-than-stellar business credit score. Likewise, if you have trouble making payments on your debts on time, or if any debts have been sent to collections, then your business credit score will likely take a hit.

Dun & Bradstreet Credibility Corp., commonly referred to as D&B, is more or less the industry leader when it comes to the business credit reporting business. Since 1962, the company has operated the Data Universal Numbering System, or DUNS, which provides unique nine-digit identification codes to businesses.

Why do you need a DUNS number ? Simply put, many banks and lending institutions will use it to look up your credit history; without one, you could be left high and dry. Also, if you ever want to secure a goverment contract or apply for a loan through the SBA, you’re required to have a DUNS number.

Rapper and songwriter Drake might be able to go from 0 to 100 real quick, but don’t expect the same to happen for your business credit score. Raising your business credit score is a slow and calculated process — definitely not something that instantly resolves itself overnight.

However, if you maintain an efficient system for handling cash flow, pay your debts on time, and have a history of being a responsible corporate citizen, then your business credit score will be in great standing before you know it.

Post by: Steven Richmond

Steven Richmond worked as a government and business journalist before becoming Editor-in-Chief of BadCredit.org , a leading website for consumer credit and debt news and advice, and CardRates.com, a comprehensive guide to credit card rates, deals and information.

Company: BadCredit.org
Website: www.badcredit.org
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