Want to improve your business's credit rating? Use this checklist.

A business credit rating is an assessment of how well your company manages its financial commitments and uses credit. Credit bureaus devise a score by monitoring payments, credit habits, and other business financial activity. Each business credit bureau varies in how it tracks and calculates scores, but the importance of a strong credit profile is constant.

A good business credit rating may pay off in many ways, including potentially positioning you to secure the best financing rates and earn competitive payment terms with suppliers. A positive score may also make potential partners more inclined to work with you.

Improving your business credit rating is a matter of managing finances carefully and tracking your score to be sure it's accurate. Use the following checklist and FAQs to learn specific steps to boost this important part of any business profile.

Pay bills on time.

On-time payment history is the biggest contributor to a good business credit rating, so make prompt payment a priority. Setting reminders or using automatic payment tools may help you stay on track. If you foresee trouble making a payment, let vendors or creditors know right away, since proactively establishing a plan to pay may prevent a late payment from being reported.

Increase reporting of on-time payments.

The more positive payment experiences on your report, the better your score may be. Only some companies report to the credit agencies, so ask potential vendors whether or not they do. Typically, companies that have a Net-30 policy, meaning bills are due in 30 days, will report to the business credit bureaus. You can proactively research companies that report to the credit bureaus and should strive to work with at least some of these vendors.

Lower your credit-use ratio.

The amount of available credit you use may raise or lower your business credit rating. Aim to cap use at 30% of your total credit limit, or even lower if possible. A higher credit-use ratio signals an overreliance on credit, which could hurt your score. Increasing your credit limits can help improve your creditworthiness by decreasing the amount of available credit being used. Keep track of employee spending on cards as part of this effort.

Know where you stand.

Bill payment timing, the amount of business credit you carry, credit inquiries, and other factors can all impact your business credit rating. Monitoring your credit score routinely will allow you to resolve issues, fix errors, and address fraud. The three largest reporting bureaus are Dun & Bradstreetⁱ, Equifaxⁱⁱ and Experianⁱⁱⁱ. If you're applying for an SBA loan, your FICO® Small Business Scoring Service (SBSS)^iv score is important to know, as it will play a significant role in the approval process.

Avoid closing accounts.

Each account you close has the potential to reduce your available credit, which may increase your credit-use ratio and lower your credit rating. This means you should keep accounts open, even if you have paid them off and no longer use them. Avoid opening new accounts just to increase available credit, since long-standing accounts demonstrate your ability to manage credit over time.

Maintain good personal credit.

Apply the same good habits you use to manage business credit to build and protect your personal credit score. Personal credit could play a role in how you are evaluated for business financing, leasing, and other decisions, particularly when you are first starting out. Free copies of personal credit reports are available online from the three major bureaus — Equifax, Experian, and TransUnion.

Business credit score FAQs

What is the difference between personal and business credit?

Personal credit scores are based on your personal payment history, use of credit, length of credit history, and credit inquiries. These activities are associated with your social security number and are tracked by three major credit bureaus: Equifax, Experian and TransUnion.

Business credit ratings are associated with your Employee Identification Number (EIN) and reflect payment history and credit use as well as details such as business size, the risk profile of your industry, tax liens, bankruptcies/judgments, and other business details. Each of the three major business credit bureaus — Dun & Bradstreet, Equifax and Experian — use different approaches for devising business credit scores. If you're applying for an SBA loan, your FICO SBSS score is also important.

What are the three main business credit bureaus?

Dun & Bradstreet, Equifax, and Experian are the three major business credit bureaus, and each has its own way of calculating business credit ratings. Dun & Bradstreet is known to base its scores on a business's financial standing with its vendors. Equifax leans on information from the Small Business Finance Exchange. Experian uses data from suppliers, lenders, and banks to devise a rating.

What is a good business credit score?

Each business credit bureau has its own measurement and scoring system for business credit ratings. Some of the scores used by the bureaus and the ranges to aim for are:

Dun & Bradstreet:

• The PAYDEX Credit Score: 80-100.
• Failure Score (formerly known as the Financial Stress Score): 1,570 or higher.
• Delinquency Predictor Score: 580 or above.

FICO:

• SBSS: 155 or higher

Equifax:

• Business Payment Index: 90 or higher.
• Business Credit Risk Score: 700 or higher.
• Business Failure Score: ~1,300 or above.

Experian:

• Experian Business Credit Score: 100–76.

How can I check my business credit score?

Contact the business credit bureau or bureaus from which you want a report. Unlike personal credit reports, which are free, these reports are available online for a fee. Some companies also offer alert services that notify you when your score goes up or down.

How often should I check my business credit score?

It's recommended that you check your business credit rating at least once a year, but more often, such as once a month, could be prudent to look for errors or fraud.

Do I have a business credit score if my business is new?

Business credit builds slowly as the business credit bureaus track and compile your business activity including registering, establishing bank accounts, getting business credit cards, making payments to suppliers, and other activities. If you want to establish a credit profile with Dun & Bradstreet, you need to proactively sign up for a Data Universal Numbering System (D-U-N-S) number. Equifax and Experian do not require this.

What does a business credit report look like? (What information does it have?)

Reports will vary by bureau, but common elements include:

• Basic business information, such as company name and EIN.
• Relevant public records, such as liens or bankruptcy filings.
• Credit utilization.
• Payment history.
• Credit score.

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