A business credit score applies to businesses that have a bank account separate from employees’ personal bank accounts. This differentiation sets a serious business apart from a hobbyist. Understanding your business credit score will help other businesses and banks know how trustworthy you are monetarily and can help you make your business as productive as possible.
The Importance of a Business Credit Score
A FICO small business credit score ranks a business’s credit trustworthiness on a scale of 1-300, 300 being the most trustworthy. Having a strong business credit score matters when trying to get banks and lenders to trust you, should you need to take out a business loan. Additional benefits are below.
Benefits of a Strong Business Credit Score
A business score keeps business finances separate from personal finances, allowing you to preserve your personal assets and personal information. Should your business suffer financially, you do not need to risk your personal assets in taking on a business loan.
A high business credit score helps you save more money than a low one. Because other companies trust you more, you get the reward of lower interest rates on loans, potentially lower insurance rates, and easier access to business loans in general.
How to Improve Your Business Credit Score
If your business credit score is lacking, practicing good credit habits will improve it over time. It is only a matter of time before it will rise, which leads to the first tip. Continue to use credit regularly enough that your good habits will change the average score and make your overall credit score rise.
What are these good habits? Make it a priority to pay business debts early or on time. Late payments incur fees and a lower score.
Also, do not spend up to your credit limit. Keep it at a maximum of 30% at once to lower your risk of running out.
If you do not have a business credit card already, now is a good time to apply for one. This card will record your dealings and form a credit report.
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