Do you know your personal credit score? Do you know your small business’s score? Similar to personal credit scores, business credit scores are used to convey a business’s creditworthiness to lenders, suppliers and more. Knowing how to check your business credit score, what it is based on, and what you can do to make it work for you are important tools for every small business owner. Before exploring how to check your business credit score, let’s consider what it is and how it is computed.
Business Credit Scores
Business credit scores are used by lenders, suppliers, and other organizations to assess the risk of extending credit or doing business with the company. Business credit scores are calculated based on a variety of factors, including:
- Payment History: This includes whether the business pays its bills on time and in full, and whether there are any delinquent accounts or collections.
- Credit Utilization: This refers to the amount of credit the business is using relative to its available credit. A high credit utilization can be seen as a sign of financial distress.
- Length of Credit History: This refers to how long the business has been using credit. A longer credit history can be seen as a positive sign of financial stability.
- Industry Risk: The risk associated with the industry in which the business operates can impact its credit score.
- Public Records: This includes any liens, judgments, bankruptcies, or other public records associated with the business.
- Company Size: The size of the company can also impact its credit score.
Business credit scores are typically calculated by credit reporting agencies such as Dun & Bradstreet, Experian, and Equifax. Each agency uses a different scoring model.
How To Check Your Business Credit Score
To check your business credit score, you will need to contact one of the credit agencies and provide information such as the company name, address and tax ID number. Some agencies may require additional information.
Unlike consumers who have the right to obtain a free copy of their own credit report annually from each of the major credit reporting agencies under the Fair Credit Reporting Act, businesses must pay a fee to the credit agency to obtain a copy of their own report. The fees for business credit reports can vary depending on the reporting agency, the level of detail included in the report, and the frequency of updates.
While it may be frustrating to have to pay for your own credit report, it is important to remember that the information in them can have a significant impact on your ability to obtain credit, secure favorable terms, and establish relationships with suppliers and other business partners.
Once you have received the report, review it carefully to determine what factors are influencing your score and determine what you can do to improve your score. Regular review can help you identify issues and inaccuracies and help you to take steps to improve your score.
Addressing Business Credit Score Inaccuracies
If you find issues in your report, what are your options to address them?
Small businesses can dispute items in their credit report if they believe the information is inaccurate or incomplete. Under the Fair Credit Reporting Act, consumers and businesses have the right to dispute any information on their credit report that they believe is inaccurate, incomplete, or unverifiable.
To dispute an item on a business credit report, a small business should follow these steps:
- Obtain a copy of the credit report with the item they wish to dispute.
- Identify the item that is inaccurate, incomplete or unverifiable.
- Gather supporting documentation that shows that the item in question is an error, which could be invoices, receipts, bank statements, or other records.
- Submit a dispute to the credit reporting agency using an official form that clearly explains the item in question, the reason for the dispute, and any supporting documentation.
- Wait for a response: The credit reporting agency will investigate the dispute and provide a response within 30 to 45 days. If the agency determines that the item is inaccurate, it will be removed from the credit report. If the agency determines that the item is accurate, it will remain on the credit report.
Working with Haworth & Company
It’s important for businesses to monitor their credit scores regularly and take steps to improve them if necessary. This can include paying bills on time, reducing credit utilization, and disputing any errors or inaccuracies in credit reports. By maintaining a strong credit score, businesses can improve their chances of obtaining credit, securing favorable terms, and building a strong reputation within their industry. Working with Haworth & Company can help small businesses maintain or improve their credit scores thanks to our expert bookkeeping and accounting teams. Let us help you manage your finances and achieve the credit scores you need to help your business grow. Contact us today to get started.
Disclaimer: This blog content is for general informational purposes only, should not be considered professional advice, and does not establish a client relationship. Haworth and Company is not liable for the accuracy of this information or the content of external links. Please use this information at your own risk, ensuring it suits your specific needs, and consult with a certified tax professional for your own personalized guidance.
