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Business credit scores are determined and influenced by different criteria than personal credit scores. They are much more complex; more goes into the determination of a business credit score than just whether you pay your bills on time.
Business credit scores firstly are reflections of a business entity, not an individual. In order to create them, you must register the name of your business with a federal EIN, incorporate or form an LLC, complete all the necessary forms and fees, and register the business with one or more of the following business credit reporting bureaus: Dun & Bradstreet, Experian, Equifax, and Business Credit USA. This process is necessary to separate your business credit from your personal credit.
Not doing this can be dangerous to your personal credit. The consumer credit structure is set such that the number of inquiries that get made on your credit score is just low enough not to negatively impact it. However, business ownership creates a number of trade lines that double the number of inquiries made annually on one’s credit score, which negatively affect it. If left unseparated, the existence of the business alone will hurt the owner’s personal credit scores, not to mention the potential shortcomings of the business.
After this, the credit building starts. You will want to start opening lines of trade in the business’s name and start by searching for companies that will be willing to grant credit to the business without a personal credit check or guarantee. This is a very necessary step as it opens the doors to getting business credit cards and getting business loans.
The process of building business credit is very different from personal credit. Business credit is based on a scale of 0 to 100, with 75 considered excellent (as opposed to personal credit, which is based on a scale of 300 to 850, with 680 being considered excellent). Business credit does factor into account the timeliness and regularity of your payments, but it also incorporates factors such as profits, which are really the backbone of business credit scores.