How to Use Your Business Credit Score to Your Advantage

While many business owners are more than aware of their personal credit scores, there are many who are simply unaware of how their company’s credit score contributes to their potential success.

Business credit score

As most professionals know, a good, clean credit score can be the difference between loan or mortgage approval. If you have ever applied for credit, a lender will generally use this metric in their assessment of you and the risk you pose to their business. This three figure number (generally between 300 and 900) is a representation of your history of how you have handled credit. This information is widely available in 2018, meaning that there is no excuse not to be familiar with how lenders treat you, considering that almost everyone has access to their free credit score.

Even if you run a small or medium-sized enterprise and deal with creditors, be it factoring or any other type of finance, your business will have been studied for potential risks. Keeping your business affairs in order is crucial to you having a smoother and more trustworthy relationship with those you apply for credit with.

While business credit scores are not as direct or official as those attributed to individuals, they still serve the same purpose. If there is adequate information available to lenders to suggest that you may be likely to skip on repayments, you may find it hard to convince those you need to borrow from that you are good for it.

Dun & Bradstreet’s Paydex score and FICO’s LiquidCredit Small Business Scoring Service (SBSS) are two examples of companies which assign a number between 0 and 100 to your enterprise. A score above 80 indicates a very good score, while anything below 50 is generally considered to be poor. If you are not aware of how this can potentially impact your business, it is a good idea to look into it.

How to improve your chances of a good relationship with vendors

Much like how you take care of your individual credit score and credit report, learn what factors go into the scoring system and ensure that you work towards avoiding the negative factors which make you look bad. While a business credit report is based upon information shared by those you chose to do business with, there is a chance that you may approach those companies with a view to finding out how they perceive your company.

Suggest that creditors report information about your business

For smaller companies with limited history, there may be little to no information submitted about your credit performance. By asking vendors to submit positive information to credit reference agencies, you are ensuring that this information makes you look better to any potential creditors further down the line.

Always ensure that you are at least on time with repayments

If a friend asks to borrow money for any reason, we generally consider the prospect that their promise to pay may be influenced by their requirement for money rather than the ability to pay it back. Creditors operate on the same fundamental principle, meaning that longer payment terms are afforded to businesses that are likely to make repayments on time.

If that same friend who owes you money on the 1st of the month repays you a week early and has a track record of doing so, the likelihood of you happily lending them cash increases. Make sure you honor repayments and the terms agreed between you and your lender, and always strive to make repayments early if it is possible to do so.


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