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| Understanding Your Business Credit Report |
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If you are getting denied for small business credit cards, loans, or any other type of small business debt, the problem may be your business credit report. Like a personal credit report, your business's credit rating is what lenders will look at when choosing whether or not to give you a loan. Understanding how your business's credit rating is established and what it means is essential to succeeding in the world of small business finance.
First, it is important for you to understand that your business credit report is completely separate from your personal credit rating. Your personal credit rating is connected to your Social Security number. Your business's credit rating will be connected to your EIN, or employer identification number. If you have not registered for an EIN, then your business does not exist in the world of small business credit reports.
Now, how is your credit rating established? Like your personal credit rating, a business credit rating is established based on current and past debts. If you have debts that are reported to the credit reporting agencies and you keep those debts current, you will start growing a good credit rating. If you consistently pay your bills late or not at all, you will have a low credit rating. Also, the amount of debt you have in proportion to the money your business makes will affect your credit rating.
There is one major difference, however, between small business credit ratings and personal credit ratings. Not all small business loans, grants, or other forms of debt are reported to the credit reporting agencies. See, there are no laws that require business lenders to report. This means that some of your debts may not be helping or hurting your credit rating. It is important to make sure that your lender is one that chooses to report your payment history as you work to build a good business credit score.
Also, the credit reporting agencies are different for business credit ratings. Dun and Bradstreet, Experian Business, Equifax Business, and Business Credit USA are all bureaus that collect business credit information. Each of these may have different score listed for your business, because your small business start up credit cards or other lenders may report to only one or two of them, if any at all.
Now, the number attached to your business loans report is also different than your personal credit score. Your business credit score will fall somewhere on a scale between 0 and 100. Any score that is 75 or higher is considered an excellent score. This is far different than the personal credit score, which will be a number between 300 and 850.
Understanding your business credit score is the first step towards establishing a good small business credit loan history. Next you need to find some lenders who will report your loans to the bureaus. Then, start paying your bills on time each and every month. Avoid accumulating too much debt in proportion to your business income, as this can lower your credit score, even if you pay your bills on time. Soon you will be very happy with the information shown on your small business credit report.
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