The credit score for your business is just as important as your personal score. After all, if you want to be able to get lines of credit for your business, you will need to be able to prove that your company can pay its bills on time. Although the scoring process is different from a traditional FICO score, it provides potential creditors with a very clear picture of your company’s payment history.
Contents
1How do Business Credit Scores Work?
There are several different credit bureaus that collect and report on businesses, but Paydex provides the scores that most companies pay attention to. Your personal credit score will range from 300 to 850, but your company’s score will be rated according to a simplified scale that is very easy for creditors to understand. For example, if your score is between 80 and 100, your company has a proven track record of always making payments either on time or early. Anything below an 80 indicates that most payments are received at least 15 days late. A score of 20 will tell creditors that your business makes most of its payments at least 120 days late, and this is likely to cause you to be turned down for new lines of credit.
2How can I Repair My Company’s Credit?
Repairing your company’s credit is similar to undergoing the same process for your personal score. By taking steps to reduce your company’s monthly expenses so that it is easier to pay bills, you can free up some money to apply to your past due debt. Additionally, it is a good idea to contact a credit counseling service that has experience working with businesses. These companies can provide you with valuable tips for getting your credit back in line, and they can also help you negotiate easier payment terms with your creditors.
3Could I Just Use My Personal Credit?
If you have a solid personal credit score, you could potentially use it to help you obtain some of the necessary items for your business. However, this is a very risky thing to do because you might not get your money back in a timely manner. Additionally, many businesses fail, and if this happens, you will be stuck with all of the bills. Therefore, to protect your personal credit score and your future financial stability, it is definitely not a good idea to acquire things for your business by taking out loans in your name.
4Does My Business Need a Credit Card?
Some businesses will get into financial trouble and then attempt to avoid using credit going forward. Although it is always best to minimize your reliance on credit cards and other loans, it is imperative for your business to have access to money during an emergency. For example, if you run a small property management company, you will need to be able to quickly purchase expensive items such as a new water heater. Therefore, you will need to have access to a credit line unless you will always have a large quantity of cash on hand.
5Why is My Business Credit Important?
Your business credit score could end up making or breaking your company during an emergency, so make sure that you take the proper steps to keep it as high as possible. It can make a difference in short term needs as well as your future growth – when loans, such as small business loans, become important for expansion or to help you stay afloat during tumultuous markets.
DebtPayPro is one of the larger providers of software systems for agencies who can repair your business credit. These important tools will help them improve and maintain your credit scores and keep track of mitigating factors having to do with loan qualifications for your business in the future.
Photo credit:
- http://www.flickr.com/photos/pagedooley/3086292921/
- http://www.flickr.com/photos/86530412@N02/8224529071/