Credit reports and credit rating scores go hand in hand. The credit score is a snapshot of what the credit report says. For example, a high personal credit score indicates that the credit report is of someone who is a good credit risk. The same is true for small businesses. If your small-business credit score is high, lenders will be more excited about working with you. For this reason, it’s important to keep tabs on your credit score and make sure it is high as it can be. To do that, though, you have to have an understanding of how the credit score rating scale works for small businesses.
What Is a Credit Score Rating Scale?
The credit score rating scale is a way of understanding your credit score. Potential lenders do care about the exact credit score for your small business but they care as much if not more about what that number means. Different credit bureaus generate different scores, and each type of credit score may have a different rating scale. The accepted standard for personal credit scores has long been the FICO score. If you’re a small business, however, you’ll also want to pay attention to your PAYDEX score.
Understanding the Credit Score Rating Scale
The FICO score is a number on a rating scale that ranges from 300 to 850. The higher you are on the scale, the better it is for your credit. The specific number is not as important as what risk group your number puts you in. The numerical ranges correspond to how likely you are to default on a loan. People with scores above 760 rarely default a certain, whereas those with scores below 600 default more often. The less likely you are to default, the better loan terms a lender can afford to give you. At a score of 760 or above, you are likely to get the best interest rates.
Any score over 700 should get you a competitive interest rate, whereas scores of 660 and above should still yield you a good rate. Between 620 and 660, the interest rates gets less competitive, and below 620, you can expect to pay significantly higher interest rates for your loan.
The PAYDEX credit score rating scale is measured from zero to 100 and is commonly looked at by businesses and those considering extending credit to businesses. A score of 20 or below indicates that you are consistently more than 120 days late with your payments. If your score is this low, you will have an extremely difficult time getting credit and your reputation in the marketplace may suffer. If your score is 80 or above, your credit is in good standing and you can expect the most favorable terms from lenders.
Using the Credit Score Rating Scale
Be sure to check your credit scores frequently in order to know where you stand. The more information you have about your credit rating and credit reports, the better equipped you will be to make important business decisions.
Requesting a Credit Score
Requesting a business credit score is similar what a consumer or individual does who wants to view their credit score. A consumer requests get a person’s credit score from a consumer credit bureau and companies get their score from a business credit bureau.
Key Business Credit Score Factors
A credit score is the numerical representation of a company’s creditworthiness. The major factors that influence a company’s credit score are payment history, financial condition, any legal actions the company is involved in and the type of business.
This credit score is used by lenders and other businesses to assess the risk of doing business with a company.
How to Get My Business Credit Score
Like consumers, businesses can monitor their credit by requesting a credit score and registering for some of the services provided by credit agencies. Requesting a credit score is simple.. Businesses may request their credit score by visiting a credit reporting agency’s website or by contacting an agency representative by phone. Some information is needed, such as the name of the business, address, and a business identification number.
Businesses can do more than just request their credit score. Credit agencies are able to help businesses:
- Manage business credit – credit bureaus provide assistance in establishing credit, obtaining a loan and getting attractive payment terms.
- Reduce credit risks – measure risk and fix credit terms, evaluate unknown entities, and assess existing relationships.
- Identify new customers and clients – build new leads, clean and integrate customer information into your own system, identify markets, and customize advertising, marketing and sales efforts.
- Manage vendor relationships – certify and analyze vendor affiliations, monitor and mitigate supplier risk, and execute vendor diversity.
Credit bureaus provide these services and more. If you are simply looking to view your business credit score, reach out to a reputable business credit bureau today.