Also known as business credit score, business credit serves as financial ratings for businesses. Business credit scores are typically calculated from various traits, such as outstanding debts, length of credit history, payment history and more. Business credit is similar to personal credit in that it represents the ability to borrow money based on past actions. But all business owners should understand why it’s important to distinguish between the two. While personal credit is linked to your personal information (tied to your social security number), business credit is linked to your business (tied to your business identity with a separate tax I.D. number). Once you establish business credit, your personal credit history won’t impact your business credit, and vice versa. However, both histories may be determined relevant to a lender making a credit decision.
How to Establish Business Credit
There are four steps you can take to begin building business credit:
Once you've completed the steps above, you can apply for credit in your company’s name. Your business transactions are then reported to Experian, which will create a business credit report that gives lenders and suppliers information about your company. This will therefore improve your ability to obtain business loans and secure more favorable credit terms.2
Can I Get a Business Loan Without Perfect Credit?
Having less-than-perfect business credit doesn’t necessarily preclude you from getting approved for a business loan. At Headway Capital, we take a holistic approach to reviewing an application, so factors other than a business owner’s personal and business credit score are just as important to determining creditworthiness.
2Experian. (n.d.). How to Establish Business Credit. Retrieved May 2, 2017 from http://www.experian.com/small-business/establish-business-credit.jsp
1We always do a soft inquiry unless your credit file is restricted, in which case we would ask you to contact the credit bureau to lift the restriction. Doing so may result in a hard pull.