Most of us know at least a little something about our personal credit score. This score is taken into account when borrowing money and is usually based on a series of different personal factors including how much debt you are currently in and how good you are at paying off your debts on time. The better you utilize credit and the more often you pay on time, the higher your credit score will be. Credit scores for businesses work in a very similar way. Whether you are in the process of launching a new business, or are considering borrowing money for your existing company in the future, here are some of the main things to know about business credit scores.
How Do Business Credit Scores Work?
Business credit scores are given to companies rather than the individuals that are associated with them, and are just another way to keep your personal and business finances as separate as possible. Just like with people, a business that has no financial history and has not yet borrowed or repaid any money might have a very low or even non-existent credit score. You can build it up by applying for products such as a short-term small business loan or a business credit card and making regular, on-time repayments to demonstrate that your business is financially responsible and can be trusted to borrow.
Why Your Business Needs a High Credit Score:
These tips to building your business credit as a startup can help you get set off in the right direction if you are building your business credit score from scratch. There are many benefits of getting started with working on your business credit score as soon as possible when launching your startup. Just like your personal credit score, a higher business credit score will make it easier for your company to access different lines of credit including business credit cards and loans, allowing you more access to funding to invest in your business and help it grow.
How to Grow and Protect Your Business Credit Score:
Your business credit score will work in a similar way to your personal credit score. Get started by applying for a business credit card or small business loan that is designed for companies that are just starting out with little to no financial records. At this stage, a bank loan or a high-limit credit card might not be something that your business is likely to be accepted for, but you can work your way up to this as you improve the business credit score.
To protect your credit score and keep it heading in the right direction, it’s important to be careful when making repayments and always ensure that you repay on time and the right amount. Missed, late, or partial payments can damage your business credit score and send the message to potential lenders that your business is struggling.
Just like we all have a personal credit score that is taken into account when borrowing money, your business has its own credit score that is considered when applying for company funding.