Understanding Business Credit Ratings: 5 Things You Should Know
You have your own personal credit rating. However, business owners also have to contend with business credit ratings. This score can greatly impact how well your business is able to operate, so it is important to learn a little bit about your company’s rating.
One thing to be familiar with is that your personal credit score can impact your business rating. If a bank is determine whether to give you a loan, it might look at your personal score as well to figure out if you qualify. However, that relation does not work conversely. Your company’s credit rating will not impact your personal score.
Something else you should know about this area is that sometimes mistakes can happen. An error or discrepancy can pop up on your credit score due to no fault of your own. For this reason, it is important to check in on your credit score every so often to make sure everything is correct. You should review your rating three months before you plan on getting a loan.
A huge reason why business credit ratings are so important is that banks will use them to figure out the likelihood of whether you make late payments. Lenders expect you to pay back your loan over a given amount of time. If your business has a low credit score, then you are viewed as being a bigger risk, and a big may not approve you for a loan.
If you try to see what your business credit score is from different companies, you might discover that each company gives you a different FICO score. The reason for these variations is the fact that each company uses different methods to come up with a score. Some of the factors include how long your business has been operating, what your payment history has been like and how many liens you have.
With all this information in mind, you might be wondering what it all leads to. A huge reason why you consistently want to have a high credit rating is that this score will determine other business relationships. You likely do business with other companies. These companies will want to look at your rating before agreeing to do business with you. A low rating means you are a high risk, and you will face greater difficulty trying to get the supplies you need.
Business credit ratings are crucial to maintain. Keep yours in check so that you are able to continue doing business with ease.