Tag: business

Both businesses and individual consumers have credit scores that reflect how they’ve historically used credit. Lenders and others use these scores to help determine creditworthiness and make decisions based on what they see. Your Business credit score is based on different information than personal credit scores and use a different scoring system. Learn now to check your business credit score. How Do Business Credit Scores Work? Business credit bureaus use information from a wide range of sources to compile business credit reports, which are then used to generate business credit scores. Data in business credit reports may come from your business’s creditors; its vendors and suppliers; public records and court filings; and collection agencies. For instance, Experian business credit reports show data such as location and contact information, time in business, the company’s Standard Industrial Classification (SIC) and North American Industrial Classification System (NAICS) codes, annual sales and number of employees. It will also show any judgments, UCC filings or tax liens against your company and any accounts in collections. Finally, it looks at how you handle commercial credit payments on loans, credit cards, and bank or trade lines of credit. Each business credit reporting agency weighs the information in your credit report differently and uses its own unique method to calculate your credit score. For example, Experian calculates your business credit score based on: Credit: Number of trade accounts, outstanding balances, payment behaviors, credit utilization and trends over time Public records: How recent and how frequent any liens, judgments or bankruptcies are and how much money was involved Demographics: The number of years you’ve been in business, your SIC and NAICS codes and the size of the business Experian Business Credit Scores range from 1 to 100. As with consumer credit scores, higher scores signify better credit. Where Can I Check My Business Credit Score? You can check your Experian business credit score by purchasing a one-time copy of your credit report or signing up for business credit monitoring, including unlimited access to scores. Reasons to Check Your Business Credit Score Prevents fraud: Monitoring your business credit score can reveal potential fraud or identity theft. A new account you don’t recognize, an application for credit you didn't make, or inaccurate information could be a sign of fraudulent activity. Contact the credit bureau if you see anything amiss on your business credit report. Monitors business health: Your business credit score is an indicator of the financial health of your business. A good business credit score can open doors, giving you access to more credit, lower interest rates and better loan terms. Your business credit may be the deciding factor in whether you get approved for a lease or for trade credit. Regularly checking your business credit score gives you a sense of where your business stands and how successful your applications for credit are likely to be. Safeguards your personal assets: Without a good business credit score, you may need to personally guarantee business loans or use your personal credit score to apply for business credit. This could put your personal assets—and personal credit score—at risk if your business suffers a downturn and you can’t pay these bills. A good business credit score can help you get credit in your business’s name, protecting your personal assets. How to Establish and Build Business Credit Start establishing a business credit history by legally registering your business and getting an employer identification number (EIN) from the IRS. Open business bank accounts, leases, utility services and other accounts in your business’s name, rather than your own. You can begin to build business credit by making moves such as getting a business credit card and requesting trade credit from suppliers, then making your payments on time. For these payments to help your business credit score, you’ll need to work with companies that report to business credit bureaus. Not all of them do, but companies are often willing to do so if you ask. As with personal credit, paying your creditors on time is key to improving your business credit score. You should also check your business credit score regularly, making sure the information in your credit report is correct and current. Keep Your Business Credit Score Healthy Regularly monitoring your business credit score helps keep a pulse on the health of your business—but as a business owner, you already have a lot on your plate. For a convenient way to track your credit score, sign up for business credit monitoring services such as Experian’s Business Credit AdvantageSM. It provides alerts whenever your business credit score changes and early warnings of potential fraud to give you peace of mind. Plus you get unlimited access to your business credit report and score all year long. About the author Karen Axelton Drawing on 20-plus years of experience as a journalist, business magazine editor, and marketing copywriter, Karen Axelton specializes in writing about business and entrepreneurship. She has created content for companies including American Express, Bank of America, MetLife, Amazon, Cox Media, Intel, Intuit, Microsoft and Xerox.

Small business owners may have a small business credit card or even use their personal credit card when they’re just getting started. However, as a business grows, new types of financing that don’t depend on the owner’s personal finances—such as corporate credit cards—may become available. The Difference Between Corporate and Small Business Cards Corporate and small business credit cards can offer a variety of benefits. One of the main reasons companies sign up for a credit card is to empower employees to make purchases on the company’s behalf by using the company card. Using these cards, employees won’t have to pay out of pocket and wait to be reimbursed later. And employers may be able to limit where employees can use the card and how much they can spend, giving them greater control over their business finances. There are some similarities between corporate and small business cards, but they’re not created for the same types of companies. While small business credit cards may be available to any business, corporate cards are primarily intended for large and established businesses. What Is a Corporate Credit Card? Corporate credit cards—also known as commercial credit cards—are credit cards for medium- and large-sized businesses, although there are also some corporate card programs for startups. To qualify, a company must be either registered or incorporated—for example, as a limited liability company (LLC) or an S or C corporation. Card issuers may look at different factors when reviewing a card application, such as the business’s revenue, number of employees, history with the issuer and investors. In some cases, a business may need several hundred thousand (or several million) dollars in revenue to qualify. You may be subject to a credit check before getting a company card, but it won’t be reported to the credit bureaus under your name or impact your personal credit. Instead, the card’s usage and payment history is added to the company’s business credit report. Corporate cards also often don’t require a personal guarantee, meaning cardholders aren’t personally responsible for the debt. Unlike many small business cards, corporate cards are often charge cards rather than credit cards—meaning the company must pay the full balance at the end of each billing period. But similarly to personal and small business cards, some corporate cards offer rewards and have annual fees. Rewards aren’t the only—or even the most important—benefit, however. Companies can request employee cards to easily authorize and track employees’ expenses, eliminating the need for reimbursement requests. Corporate cards may also offer in-depth analytics and integrate with accounting platforms, which can help businesses save time, money and paperwork. What Is a Small Business Credit Card? Small business credit cards are typically more similar to consumer credit cards than corporate credit cards. Some consumer and small business cards even have similar names, fees and rewards programs. And, as with consumer cards, small business credit cards may let you revolve a balance and charge you interest on the unpaid amount. Unlike a corporate credit card, getting approved for a small business credit card can partially depend on the owner’s creditworthiness. If you apply for a small business card, the application might lead to a hard inquiry on your personal credit report. A card issuer may even report the card to the credit bureaus under your name, meaning it can impact your credit—although some only do this if the business misses payments. Small business cards also generally require a personal guarantee. As a result, if the business can’t afford the payments, you could be personally liable for the card’s unpaid balance. However, a small business card can help you keep your personal and business finances separate. The cards may also offer business-specific perks, such as free employee cards and bonus rewards on common business purchases. And, as the primary cardholder, you may be able to set limits on employee cards and determine how you want to use the rewards. Which Credit Card Is Best for Your Business? Most small business owners, entrepreneurs, solopreneurs and contractors will only be eligible for small business credit cards. However, if you work for or run a medium- to large-sized business or a venture-backed startup, a corporate credit card may be a better option. While you could open a small business credit card, a corporate card might give you a higher spending limit, more control over employees’ cards and better analytics and reporting. The ability to finance your business’s operations without being personally liable for the debt can also be a major benefit. Be Sure to Monitor Your Company’s Credit If you run a business and want to open a business or corporate credit card, your business credit score could be an important factor. Additionally, some small business lenders require a personal credit check before they’ll offer you a business loan, line of credit, invoice factoring or other types of financing. You can check and monitor your Experian business credit report, and get insights into how you can improve your company’s credit scores. About the author Louis DeNicola is freelance personal finance and credit writer who works with Fortune 500 financial services firms, FinTech startups, and non-profits to teach people about money and credit. His clients include BlueVine, Discover, LendingTree, Money Management International, U.S News and Wirecutter. Louis lives in beautiful Oakland, California, where he enjoys indoor rock climbing, yoga, and volunteers as a tax preparer.