If your venture is incorporated, you must have an Employer Identification Number, commonly called as the EIN, and you must have registered with the business credit bureaus, which happens to be the prim step towards establishing your business credit score.
Business credit score, which is commonly called as the commercial or trade score, is mainly used by different financial institutions to which a business may apply for credit, such as the leasing companies, credit card services and banks. Suppliers and vendors who bill you on a Net 30 or even Net 60 basis perhaps also be interested in checking your business credit ratings.
As it is with personal credit rating, business credit score greatly helps the vendors and the financial institutions to assess the risk of extending credit to your business. Sound business credit ratings could mean a lower interest rate or good terms with the suppliers. A poor credit score can be a bar to establishing business relations that perhaps be critical for your growing venture. For some lenders, extending the credit to small business ventures is considered to be a medium-to-high risk attempt to start with. Poor or negative credit ratings can sound the death knell for your credit request.
Companies That Calculate Business Credit Score
There are three main companies that calculate the business credit scores: Equifax, Experian, and Dun and Bradstreet. Each one of these has its own scoring scale and criteria. Generally, nevertheless, your business’ payment history, size, age, the ratio of available credit to used credit, are vital to determining the business credit score.
How Do Businesses Get To Protect Their Credit Score
The best approach businesses must follow to keep their credit score healthy, or to improve a low score, is to ensure they make timely payments. This means not just paying credit card debt or payment of loan on time, but also making supplier payments before or by the 30 – 60 days time.
It is vital to maintaining a higher ratio of available to used credit, which is also useful in boosting the credit scoring. It is recommended to keep the debts down and ensure revenues growing.
Monitor the reports regularly. It is crucial to monitor the reports every quarterly as per the reporting bureaus. Credit can improve or deteriorate in as little as three month’s time, due to various factors like damaging report from a particular vendor or is there has been a shift in the ratio of available to used credit.
Errors do take place, and it is an entrepreneur’s job to ensure the data presented is accurate. It is imperative for you to promptly report inaccuracies, if any, to the relevant bureau along with supporting documentation. Keep a check to ensure the data presented is correct.