What do I Need to Know About My Business Credit Score?

by Debi Enders

What do I need to know about my business credit score?The first thing you should know is that, technically, small businesses don’t have credit scores. Rather, lenders gauge your business’s financial reliability using primarily your personal credit score. In addition to reporting your repayment record, this score tells lenders how long you’ve been borrowing money and how many different forms of credit you have.
In other words, if you are in the market for a small-business loan, your personal credit score matters — a lot. Personal credit scores range from 300 to 850. A score of 700 or higher tells your lender that you’ve done a good job of repaying mortgages, car and student loans, and credit card bills on time. A lower score will not necessarily disqualify you. But it might limit your choices.

The single most important thing you can do to raise your personal credit score is to pay your bills on time until a debt is paid off. You can also boost your score by limiting the amount of credit you use, which makes you a lower credit risk. You may also give your credit score a small boost by using several forms of credit: a mortgage, credit cards and a home equity line, for example.

Your business finances matter too. Over time, your personal credit score may get less scrutiny as your business builds its own credit track record. Data-gathering companies like Dun & Bradstreet develop commercial credit and financial stress scores that lenders sometimes use to help make loan decisions. Creating a strong business credit profile not only makes it easier to get financing but also can sometimes make your business eligible for lower insurance premiums and increase the likelihood that a landlord will take you on as a business tenant.
In sum, the lesson on credit scores is this: It pays to pay your bills on time.

Debi Enders (debit.enders@commercebank.com) is vice president, small business banking at Commerce Bank.