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Business creditworthiness can be determined by several factors. Key among them are the credit report, credit score, and credit rating. Here’s a look at each and its implication for your business.

What is a Business Report?

A business credit report is a collection of information compiled by a credit reporting agency about your credit history. Your company’s credit report can weigh heavily on decisions such as whether you receive a line of credit, and how much credit you qualify for.

A business credit report may be provided to a financial institution, vendor, or business partner prior to entering into an agreement. The credit reporting agencies may provide platforms for a business to request a free business credit report and check company credit score figures.

What is a Company Credit Score?

A company credit score is a number that indicates the creditworthiness of an individual or a company. It is calculated by factors such as whether or not they pay their bills and meet other financial obligations in a timely manner. Think of it as a report card for your company’s financial behavior. As such, you need to check your company credit score regularly because your payment history can be used by other businesses to determine whether or not they want to do business with you.

What is a Business Credit Rating?

A business credit rating is a letter grade that indicates the overall creditworthiness of your company. If your company has a good credit rating, it means creditors will believe you are more likely to pay back loans and other debts on time. Your rating can also have implications for your ability to get certain types of insurance.

Why Are Business Credit Scores and Ratings Important?

A good credit score can help you get a loan, get a better interest rate on your loan, and might even give you an insurance break. The reason being, creditors will likely view your high credit score as an indication that you are an excellent customer who is more likely to pay back loans and make other transactions on time. A free business credit report can be used to monitor your business’s financial health.

What Factors Affect a Company’s Credit Rating?

Credit ratings are based on your company’s business performance. Some of the most important factors are the success of your company (measured by the number of sales it has made), the financial condition of your business (measured by the amount of money in its bank account), and the financial strength of your chief executive officer and their management team. Poor business performance can quickly drop a company’s credit rating. Good business performance can raise a company’s credit rating over time.

Do Small Businesses Need a Good Credit Rating?

Many small businesses rely on credit cards and loans from banks and other lenders to run their day-to-day operations, so yes, they need a good credit rating. If a small business has an inadequate credit rating, it may encounter difficulty when getting financing or obtaining credit cards.

How to Improve Business Credit Rating

A good way to improve your company credit rating is to pay back all lines of credit on time and keep a high ratio of cash on hand relative to outstanding obligations. This will contribute towards an impressive business credit report.


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