Business credit can act as a useful negotiating or negotiation tool when you enter into pricing and service discussions with other companies. Overall, it’s an important indicator of how healthy and financially reliable your business is. Without business credit, your business will struggle to find loans, apply for credit cards, build relationships with suppliers, and succeed as a small business. It’s important to check your business credit score regularly so you can learn more about the financial health of your business. It’s a number that many providers, lenders, and other businesses want to know so they can decide how risky it would be to work with you. It can also have an impact on the interest rates you pay on loans and lines of credit.
To access these scores, you must first obtain a universal system numbering system for data. Anyone can check business credit so it can be used by lenders, suppliers, or even companies deciding if they want to do business with you. Good business credit can help you qualify for small business loans or financing, and help you get financing on more favorable terms or lower interest rates. However, because there is no requirement for businesses to notify you when your business credit is being reviewed, you may never know how your credit history has affected your business. While lines of credit and business credit cards can help build your business, too much will hurt your score.
As with personal credit, your business credit score will stay with you forever. Missing payments or taking on too much debt sends a red flag to credit rating agencies and potential lenders. Frequent changes in ownership, restructuring, late filing of tax returns, change of bank and relocation also cause a credit institution to think twice before granting credit. Paying bills on time and maintaining a good credit usage history is wise for many reasons and especially when it comes to maintaining good business credit scores. There are plenty of options for extracting business credit reports, both free and paid.
The best way to build and maintain a positive credit score is to be aware of it. Make it a point to occasionally check your credit report and dispute any errors in it. Sometimes you can remove an item from your credit report simply because the creditor doesn’t respond to your dispute within a certain number of days.
Identity theft is on the rise and this can affect your business credit and your personal credit. Equifax, one of the top three consumer credit reporting agencies, experienced a data breach in mid-2017 that exposed personal information of 143 million Americans. In this breach, hackers gained access to names and addresses, Social Security numbers, dates of birth, driver’s license numbers, and even some credit card numbers. If you’re familiar with personal credit scores, you’ll recognize business credit scores as a similar concept. As part of our mission to make money smarter, Divvy reports clients’ credit performance to the Small Business Financial Exchange (SBFE®). That means you can use Divvy to build your business credit history and credit score for your business by simply paying on time.
This comes into play when applying for credit cards or loans and is determined using information from your personal credit reports. If you want to build your business credit, criminal records open a line of credit with suppliers and lenders reporting to the business credit bureaus. You should have three to five lines of credit that report payment information.