How Business Credit Score Affects Your Loan Options
You hopefully know and understand your personal credit score, especially if you’re considering opening a business. However, did you know that your business also has a credit score and that it can have an
Here are some key things you should know about your business score.
You May Have Several Scores
Just like your personal credit score can vary from creditor to creditor, your business score can also vary widely depending on which company you get your score from. Some run on a typical credit score while others actually use a 100-point scale to determine your business’s credit score. Scores are still calculated using similar factors, however, so if your business struggles in one area, such as paying your bills on time, then you should make it a point to improve that and you should see a bump on all your scores.
It Predicts Delinquency
Part of your business credit score contains a delinquency predictor, which gives creditors an idea of how risky it might be to extend you credit. It lets them know how likely you’ll be to shut down your operations without paying back your outstanding debts within a year of extending credit, and also predicts any other things that may come up that could cause you not to pay your loans on time.
It Can Affect Rates
Just like with your personal score, your business credit score can affect whether or not you’ll even be extended credit at all, or how your rate will look if a creditor does decide to extend you credit. The worse your business’s credit score, the higher your rate will be. When it comes down to it, you really need to follow the same simple principles as you would with your personal credit. Pay your bills on time, don’t overextend yourself by taking on more debt than you can afford to pay off, having a longer history of good credit can help boost your score and be mindful about the types of debt you take on.
At the end of the day, even if your business credit score is less than desirable, it doesn’t mean getting a loan is hopeless. There are several programs available to help you get the type of financing your business needs. Consider your options and talk with your bank to see what you can do to get a favorable rate and the right type of financing for your business.