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Illustration for article titled How to Build Your Business Credit Score, and Why It Matters

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Most business owners are aware of their personal credit score, but a study suggests that 60% of them don’t know their business credit score—yet this number is essential when it comes to securing vendor contracts and qualifying for loans at competitive rates. Here’s what you need to know about establishing your business credit score and how to improve it.

What is a business credit score?

In the same way your personal credit score quantifies the state of your personal finances, a business credit score reflects the finances of your business. The score determines your creditworthiness and is calculated using credit information from your suppliers and lenders, court filings, and collection agency records.

There are three major business credit agencies—Dun & Bradstreet, Experian, and Equifax—and each provides their own scores and has different ways of calculating them. Generally speaking, however, your business credit score will be in a range from 0–100, with 100 being the highest score for creditworthiness.

These agencies also offer reports that—unlike personal credit scores—are publicly available to anyone willing to pay for them, including vendors or potential business partners that might be considering whether or not to work with you.

These reports will include background information about your company, such as your tax reporting status, number of employees, property status, and relevant banking information—including your history of bankruptcies, foreclosures, liens, and lawsuits. It’s worth noting that lenders can also look at your personal credit report, so the two types of credit scores aren’t exactly entirely separate.

The advantage of a strong business credit score is that it will help you secure bigger loans with preferable rates and terms. In fact, 45% of small business borrowers who get a “no” from creditors are turned down because of their business credit score, according to a 2019 study cited by Nerdwallet.

How to establish a business credit score

You don’t automatically get a business credit score just because you opened a business. A score is built up over time—though there’s no guarantee that will happen. To ensure you’re building a business credit score with all three major bureaus, you’ll need to follow these steps:

  • Establish your business as a separate legal entity, such as a partnership, cooperation, or LLC.
  • Open a bank account in the businesses’ name.
  • Get a separate business phone number.
  • Obtain an Employer Identification Number from the IRS.
  • For Dun & Bradstreet specifically, you’ll also need to apply for a DUNS number, which the agency will use to track your business.

How can you improve your business credit score?

In many ways, improving your business credit score is similar to bettering your personal credit score. Paying your bills time, establishing credit lines, and keeping eye on your credit reports for errors (which are unfortunately common) will all help you boost your score over time. Credit utilization, or how much of your business’s lines of credit you actually use, along with the age of those credit lines, will also factor into your score.

Unfortunately, staying on top of your credit score comes with a cost to your business, as unlike personal credit scores, business credit reports aren’t free:

  • Dun & Bradstreet’s cheapest offering that actually shows you your business credit score is the CreditBuilder Plus product, which costs $149 per month (this includes a DUNS Number for your business, if you don’t have one already).
  • Equifax charges $99.95 for a single report. (You can order one here.)
  • Experian sells a CreditScore Report for $39.95, which does include your Experian business credit score.



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