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Your business credit score can be the key to unlocking important financing opportunities for your business, so understanding what your business credit score is, how to monitor it, and what makes it fluctuate is critical.

Here’s how and where your business credit score is generated, plus what you can do to take control of your score.

What Goes Into Calculating Your Score?

Much like a personal credit score, your business credit score is calculated by various credit bureaus and is a reflection of your business’s financial trustworthiness.

Repayment history, credit utilization ratio, length of credit history, company size, and tax liens or bankruptcies, among other factors all play a role in determining your score.

Generally speaking, those who have a strong track record of responsible repayment will have the highest credit scores, whereas those who are often tardy in making payments or who have had major financial issues, like a bankruptcy, are going to have lower scores.

Who Generates Your Score?

There are three major credit reporting agencies for business credit: Dun & Bradstreet, Experian, and Equifax.

Dun & Bradstreet and Experian use a scale of 0-100 whereas Equifax offers three different assessments for businesses: the payment index (scores range from 0-100), the credit risk score (scores range from 101-992) and the business failure score (ranging from 1,000-1,610).

While the scores from these three reporting agencies are on a similar scale, the metrics and algorithms that each agency uses to generate their score are unique, meaning that you can have a slightly different credit score with each agency.

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Why is Your Business Credit Score Important?

A major difference between a business credit score and a personal one is that business credit scores can be pulled by any interested party.

If you’re applying for business financing, the lender will pull your score to get a sense of how trustworthy you are as a borrower. However, outside of lenders, your competitors or potential clients can pull your business score as well.

Competitors may pull your score to get a sense of the strength of your business. If you’re struggling to make repayments, they may take that as a sign that your business is not doing well and use this information to begin targeting your client base.

A potential client may be interested in getting a sense of the financial health of your company so they’re not left high and dry if you fall into financial trouble.

How Can You Manage Your Score?

The most important thing you can do to maintain a strong credit score is to be diligent about repayments. Whether it’s your monthly credit card statement or the weekly repayments on your short term loan, making sure that you’re not falling behind and are paying your balance in full is critical to preserving a strong score.

Additionally, having business credit cards (and paying them on time) to ensure that your credit utilization ratio is staying below the 30% mark will help to keep your business score in a desirable range.

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