Your business credit score is just as important to your business as your individual credit score is to your personal life. Business credit is calculated through what’s called the Paydex score which is maintained by Dun & Bradstreet (D&B). Through Paydex, your business is ranked on whether you make timely bill payments or not and within agreed upon terms.
Your business credit score is a number between 0-100 with a 75 or higher is generally considered to be a good score. D&B does give your business other rankings, based on the size of your business, but the only factors they consider in your score is your bill payments.
To build your business credit score, you will need a DUNS number. This is a free number, and you apply on the D&B website. You can monitor your business’ information through their online portal and make sure that there are no errors. This should be done at least once a quarter.
Making payments on time will keep your Paydex score around 80. You can actually increase this score by paying ahead of time. A score of 100 indicates that you pay your bills 30 days sooner than the terms of your contract. A score of 90 is 20 days sooner, and a score of 70 is 15 days beyond the terms.
Maintaining your business finances separate from your personal finances will reduce the possibility of commingling funds between your business and personal life. You limit your personal liability and protect your personal credit. Many organizations that extend credit to businesses also want to see that your business has corporate accounts. Although banks may need to see a personal history from the business’ officers when you apply for a loan, many suppliers just look at the business credit score when extending terms.
When your business has its own credit score, you have another asset in the company. A high credit score gives your business the appearance of stability, so that when you need a loan to make improvements or take advantage of opportunities you can get one. With a high credit score, you will also obtain more favorable rates on lines of credit.
Your business’ bill payments are directly related to your credit score. Do everything you can to make sure you pay bills on time. Building and maintaining the credit of your business is important to the overall success of your business.