Understanding Business Credit reporting Knowing how your business credit score is calculated is extremely important. This is why you need to be able to understand it completely. If you don't, you could find yourself greatly disappointed by the results of any financial evaluations for your business ventures. These credit reports are one of the most crucial pieces of personal information available to anyone who is interested in understanding your business' financial health. It is the sole basis upon which lenders will either issue a loan to you or deny you one. Understanding Business Credit reports before diving into the specifics about how they work, who they affect, and how to maintain track of them is important to know why they're so important, and this is why this topic is so difficult for so many people.
It used to be that these reports were only available to very large companies with plenty of money to spend on them. However, the Small Business Administration has recently acknowledged the need for smaller businesses to have access to them as well. The Small Business Administration works with several groups, including the Federation of American Businesses, to make the business credit scores of all qualified small businesses readily available to all interested parties. Lenders are forced to use this information in their lending decisions, and small business owners can take advantage of this information by using it to improve their business's chances of getting approved for more credit.
As mentioned above, there are several ways to obtain these reports. Most small business financing companies will offer a free one to review online before requiring you to apply for a loan. However, this isn't necessarily the best way. Using a free report is helpful because it helps you get an idea of what your business's current standing is in the industry, but a low fico score is not always indicative of your business's future. There are many reputable and highly rated small business financing companies that will offer high interest rate credit cards to new and small business owners, with low and no fees for frequent use.
The information contained in your business credit score will influence the amount of interest you're expected to pay on credit cards and home equity loans. Your business credit score may also influence the interest rate you're offered on a debt consolidation or other loans. While there are many different opinions on what exactly your business credit score represents, Bradstreet has released a study that seems to show that consumers tend to interpret the data in a different manner. According to Bradstreet, consumers think that a lower b equals a better business credit score while lenders think that a higher b equals a worse business credit score.
This may be due to the fact that consumers' perception of business credit scores and fico scores is influenced by the media more than actual facts. Media personalities often hype up the companies that they're affiliated with, infusing the public with bad business ideas and leaving consumers feeling confused and duped. These news stories become a viral marketing campaign, which means that the next time your local news station reports on a new business opportunity or financial institution offering a business credit card, millions of people will be reading it before making a decision on whether to pursue it or not. This creates a huge influence over the decision-makers of the consumer population.
The best way to get a handle on your business credit score and find ratings is to check out the various rating agencies and research the information contained within them. One option that is available for you is to request a copy of your credit report from all three rating agencies. You'll likely find that there is varying information available from each of the three rating agencies, so don't be quick to jump to any conclusion before checking them out. Take your time and conduct this review carefully, comparing . . . . . . all of the information contained within your business credit score and find ratings to ensure that you're not missing any important information. If you have any doubts about your ratings, it might be a good idea to consult one or more of the rating agencies to confirm that everything on your report is accurate.
Once you have confirmed that your business credit scores and FICO ratings are accurate, the next step is to start using them to your advantage. Business owners are often faced with the prospect of having to pitch their products and services to lenders, but without a solid FICO rating, it can be nearly impossible to secure a decent loan package. When using a credit card, be sure to pay off the balance in full every month, even if it means having to pay a bit more in interest – the payment you make now will have a far greater impact on your business credit scores and FICO ratings in the future. If you keep up the payments and use the card responsibly, lenders will see you as a responsible borrower who will likely be a good risk for loans in the future.
Another thing to pay attention to when trying to improve your FICO score is the amount of debt that you currently own. Having a lot of debt can cause lenders to view you as irresponsible because there's a chance that they won't get their money back. If you have a substantial amount of small business loans, you may have already seen your credit score drop because of that. For best results, pay off as much of your small business loans as possible, even if you do have to increase your monthly payments or change the interest rate.