If you’re a small business owner in need of funding, there are ways to improve your chances of getting approved for a loan.
One thing lenders review is your business credit score. This number acts as a snapshot of your borrowing history and the company’s overall financial health. The higher your score, the more likely you are to get approved and lower your interest rate so that you have less to pay back and more to put back into your business.
This short Q&A can help you understand the importance of your business score and how to improve it over time.
The more you know about improving your credit score, the greater the odds you’ll qualify for the loan you want.
Answer: No. There are certain steps you’re required to follow in order to obtain a business credit score.
You’ll need to:
Meeting these requirements will get your business a credit score. Learn more about how to establish business credit, even if you have a limited credit history.
Answer: No, you should have two separate credit scores: business and personal.
While it might feel like an extra step, there are several good reasons to have both (and keep them separate).
When it comes to personal credit vs business credit, having a dedicated credit score makes good business sense and offers an extra layer of personal protection.
Answer: Yes! This information is public.
Your personal credit score is highly regulated, and people can only view them with your permission. However, your business credit score is available to the public. Anyone—including lenders and suppliers—can view it.
Answer: Yes!
Here’s the good news about your business (and personal) credit score. If it’s lower than you want it to be and you’re worried it’s going to negatively impact your chances of securing a loan with a lower interest rate, there are certain things you can do to improve it.
A good business credit score is a huge asset for your small business. A credit score of 700 or above will give you some of the best options when it comes to small business loans. A score of 550 and below likely means you likely won’t meet the requirements of most lenders. Learn more tips and requirements for small business credit scores.
Answer: No, it requires more frequent check-ins.
There are a few reasons to check on your credit score on a fairly consistent basis. For starters, errors can pop up on your credit report at any point. Checking in with your report once a month ensures that you catch mistakes—including fraudulent activity or inquiries you want to remove—and address them in a timely manner.
Plus, keeping your finger on the pulse of your credit report helps you stay aware of your business’ financial health, helping you identify strengths and weaknesses in your spending, and ultimately improve cash flow.
In addition, when you know your business’s credit score, you can more accurately determine where you stand with respect to your competition.
If you want to know your credit score, each credit bureau (Equifax, Experian and TransUnion) is required by federal law to send a free copy once a year upon request.
Your credit score is one of many factors that lenders will consider when determining whether or not they want to offer you financing. Here are a few key points to keep in mind:
Are you already good to go with a solid credit score? Learn what else it takes to qualify for a small business loan.