8 Vital Facts About Your Business Credit Score

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Apr. 20 2022, Published 8:05 a.m. ET

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As a business start-up, you’ll quickly discover that potential lenders will look at both your personal and business credit scores when considering your creditworthiness. So why do you have two separate scores? How are they different, and what do you need to know about business credit as you start and grow your company?

While there are many similarities in how the two scores work, your business credit rating will become an essential part of your business’s future. Here are eight facts you need to know about your business credit score.

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1. Anyone can check your business credit score.

Unlike personal credit, your business credit score is available for anyone to check. A credit check won’t trigger a notification to you, and it doesn’t require your consent. So, companies can check your credibility for a small fee without telling you. While you won’t know when it happens, you can see who has viewed your business credit by tracking your scores. This is why it’s vital to keep a close eye on your credit records.

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2. Business credit starts when you get an Employee Identification Number (EIN).

When you set up to file taxes for your business, you’ll need an Employee Identification Number (EIN). Having an EIN will start your business financial history and business credit journey.

3. The business credit score scale is different from the personal credit score scale.

The credit score scale of business credit and personal credit is different. On the personal side, scores range from 300-850, with 850 as a perfect score. On the other hand, business credit scores range from 1-100, with 100 as the maximum score.

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4. Business credit scores include demographic information.

Your business credit score considers many factors, including your demographic information.

The factors include:

  • How long you’ve been in business
  • The number of employees you have
  • Your business industry classification

This demographic information could be a basis for another company to decide whether or not to partner with you.

5. Business credit makes some information in your business public.

Once you have business credit, some of your business information becomes accessible to the public. Anyone will be able to obtain details about such things as:

  • Bankruptcies
  • Judgments
  • Liens
  • Public details

It’s important to know what the public can learn about your company, so you aren’t caught off guard.

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6. Business credit and score may transfer.

Personal loans stay with you as long as you’re alive, but that’s not the case with business credit. Your business credit stays with your business. That means you are accountable for the business credit as long as you own it. So, if you sell your business, the business credit score will follow the new owner.

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7. Your business credit might be affected by a company having a similar name.

Pulling a business credit report is done by searching your business name with all the credit databases. This is a tremendous amount of information, considering many businesses have credit. And business credit agencies can accidentally mix up almost similar business names. It is an error that usually happens in the business credit system. To avoid or prevent this, create a business with a unique name. And as we’ve already mentioned, it’s always a good idea to monitor your business credit so you can catch these kinds of errors quickly. Some businesses hire a team with credit monitoring services to keep track of their score. The ever-changing nature of business credit scores can make this an enormous task, so having a third party take care of it will help take some stress off your plate.

A credit-monitoring service can help you;

  • Review your business credit for accuracy.
  • Develop a way for your company’s credit to improve.
  • See who is looking at your business.
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8. Business credit holds a greater capacity than personal credit.

The reason why owners have business credit is because of its large credit capacity. Business loans can be as much as millions of dollars. And they may be repayable over many years. The great news is your business credit capacity is maximized with a healthy business credit score.

Bottom Line

As you start your business, you might not plan to apply for credit right away, but, chances are, you will at some point. Understanding business credit and how your business credit score works will help you make wise choices to set your business up for success.

Just like personal credit, having a healthy business credit score will help you qualify for loans, get lower interest rates, and open accounts with vendors, among other things. Practicing good credit habits will allow your business to take advantage of new options and opportunities as you grow.

This article was written by Sharita Humphrey and originally appeared on Score.

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