Like many business owners, you may wonder about the purpose of business credit. Why is your business credit a big part of your evaluation to know if your business is good? I get a lot of questions and thoughts about business credit from time to time. Starting from, what is business credit? And how do I find one? To what lengths can you apply to get a positive rating score?

Here, I answer eight commonly asked questions about business credit.

1. What is business credit?

Business credit is a part of your business profile and a tool used to know the ability to pay back a loan. To keep it simple, business credit will help you buy something now and pay it later. You need to have a good credit score to prove to creditors that your business is worthy.

2. How can I get business credit?

You need your business to be established. Make it an LLC, partnership, corporation, sole proprietorship, etc., then your business credit profile will be created. Parts of the business profile are included in the public record. The business credit is public. So, anyone can look at it. Meanwhile, your personal credit score can’t be viewed by anyone, but several things from it could affect your business credit positively or negatively.

3. How to make a strong business

credit profile?

It should be a priority to build a strong business credit profile. Even if you’re a new business entrepreneur, view it like it’s a credit card for business. Start small and build your business credit from that stage.

Here’s a tip: Vendor credit is a smart way many new businesses establish with their credit profile. Trade credit is probably one of the easiest ways to establish your business credit profile and a fantastic way to build a solid business credit score. You use these two tips to increase your score at the start of your business because these tips won’t last long as business time goes.

4. Where can you go and see your business credit profile?

There are a lot of places you can go to view your business credit profile. All credit bureaus will give you access to view your score. They also want to ensure that your information and their records have the same accuracy. So it makes sense to review your profile regularly. There’s no penalty for inquiring about your business credit profile, which is a nice perk to have.

5. What are the main business credit bureaus?

The top business credit bureaus in the country are Experian, Equifax, and Dun & Bradstreet. These three credit bureaus have a slight difference in creditworthiness evaluation. So, I recommend that you do good research on these three and decide which one is best for business.

6. How often should you check your business credit profile?

If you’re a conservative person, check your profile monthly. It’s the best way to find errors and fix the minor issues before they go on too long. We pay the most attention to things that give impact, and checking your profile monthly is not that frequent.

7. How can you improve your business credit profile?

If you don’t like your business credit score right now, don’t worry. There are ways to improve it, but it takes effort. Pay off your business credit often to keep the debt ratio low. Don’t wait for monthly statements to come; pay them off each week. You can pay online or on your phone for easy convenience. Do you owe money to a creditor? Pay in full, and pay it off as quickly as possible. Don’t close your credit accounts. The length of your credit history matters.

8. Does your time in business affect the score of your business credit profile?

It doesn’t necessarily impact your credit profile, but if the business is in the early stage, it will be hard to find a small business loan. Strong profiles that show histories of credit and service debt can positively impact your profile. The longer your credit history, the more information your creditors can have in your profile to prove your creditworthiness, and they can determine if you have a good track record.

Once you understand your business credit score, you’ll never feel helpless, and this will remind you about the status of your business.

Article republished with permission from SCORE, Mentors to America’s Small Business. Get free advice from more than 10,000 volunteer business mentors across the nation at www.score.org. Sharita Humphrey is an award-winning finance expert and money mentor. She was named the 2020 National Financial Educator of the Year for her work within her local community and across the country. She has been featured in top-tier media including CNBC, iHeartMedia, Forbes, Yahoo! Finance, and BBC World News.

© SCORE 2022.