Understanding Business Credit Scores & How to Improve Yours
When most business owners are thinking of expanding their business, they consider sales, marketing, or product. What usually gets left out? Business credit.
Similar to how your personal credit score affects your ability to obtain a loan or lease an apartment, your business credit score can impact if you’re accepted for money, how much you pay in interest, and even the way vendors and partners view your business.
But most small business owners don’t even realize they have one—until it’s an issue.
Here in this blog, we’re going to clarify what a business credit score is, how much more important it is than you ever thought, and how you can begin building or fixing yours today. If you’re new to the game or already growing, knowing your business credit may be the secret to opening new doors.
What Is a Business Credit Score?
A business credit score is a figure that indicates how financially accurate your business is. It’s similar to your credit score, but for your business.
These scores usually range between 0 and 100, based on the credit company (e.g., Dun & Bradstreet, Experian Business, or ).
The higher score indicates lower risk to lenders, insurers, and even future partners.
- 80+ = Low Risk (Good Credit)
- 50-79 = Medium Risk
- Below 50 = High Risk
Why Does It Matter?
Some small business owners claim business credit does not impact them—”I just use my personal credit anyway.”
It might be true in the beginning. But in the end, business credit does matter. A whole lot.
Here’s why:
- Loans & lines of credit
- Lower interest rates
- Larger sales limits
- Maintaining of personal credit
- Improved business insurance rates
The Hidden Danger: Separating Business and Personal Credit
It’s common for startups to use personal credit cards or loans to finance operations. But it can be dangerous.
You are personally responsible if your business fails. High personal credit utilization can damage your personal credit score.
It muddies the difference between business and personal finances—and that can lead to tax and legal difficulties. Getting independent business credit shields you and your business in the long term.
How to Build and Improve Your Business Credit Score
Your score improvement isn’t rocket science—but it does take discipline.
- Properly Register Your Business
Form an LLC or corporation and obtain an EIN (Employer Identification Number). Open a business checking account. This keeps you separate from your business. - Become Reportable with Credit Bureaus
Ensure your business is reportable with organizations such as Dun & Bradstreet (D-U-N-S Number is critical), Experian Business, and Equifax Business.
3. Open Accounts with Reporting Vendors
Begin doing business with vendors and suppliers who report your payment record to credit. Pay on time (or early!).
