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What Is Business Credit?

Here at Customer Service Fundamentals we want you to  understand what business credit is.  It’s a term that describes several tools lenders, creditors and vendors use to measure the creditworthiness of your business. The business credit umbrella involves two terms:

  • Business credit reports. These contain your company’s credit history. This information can show others how you have managed commercial credit obligations in the past.
  • Business credit scores. These evaluate the information found on your business credit reports and predict future financial performance. For example, some business credit scores may predict the likelihood that your business will fail. Other business scores may analyze how likely your company is to default on its credit obligations.

Business Credit vs. Personal Credit

Both business credit and personal credit can help lenders, insurance providers and others evaluate risk. However, your business credit and personal credit are separate.

Personal credit reports contain information about how you manage credit obligations that you take out in your own name under your Social Security number. Business credit reports contain details about debts in your company’s name and the payment history on those accounts (on-time, late, etc.).

Although your business and personal credit reports are separate, small business owners need to proceed with caution where business credit obligations are concerned. It’s not unusual for commercial lenders and business credit card companies to require personal guarantees from business owners. In such scenarios, paying a business credit obligation late might damage both your business and personal score.

How Does Business Credit Work?

Business credit is similar to personal credit in several ways. When your company opens a credit obligation in its name, the creditor may report the account to one or more of the business credit reporting agencies—Dun & Bradstreet (D&B), Experian and Equifax.

It’s worth noting that Experian and Equifax are also consumer credit reporting agencies. However, your consumer credit reports and business credit reports remain separate from each other. (Some accounts might appear on both types of credit reports, depending on lender credit reporting policies.)

Once a creditor reports an account to a business credit bureau, it should appear on your associated business credit report. If your company always pays the account on time or early, your business credit score may improve.

However, if your business makes late payments, its credit score might decline instead. A bad business credit score may make it challenging to qualify for affordable financing like business loans and business credit cards.

The Business Credit Solutions consultation is designed to enable you  to understand the necessary steps involved in enhancing your ability to properly evaluate your current business credit status.  Ultimately arming you with the tools to build business credit to increase your funding opportunities.