Unlike your personal credit score, which is universally expressed in a simple three-digit score, your business credit profile is different. The credit bureaus don’t use a single score to describe your business credit, but rather a selection of scores and reports based upon information collected from the public record along with your credit history.
What’s included in your business credit profile?
- General information about your business like your address, your industry and other information that would be filed with the state or the city where you do business
- Information about the credit relationships you have with your suppliers
- Your payment history with any current business loans and/or business credit cards
Your profile will likely report any outstanding judgments, liens or lawsuits as well as how many days past agreed upon terms you pay your vendors. It may also include a recommended credit limit, an evaluation of your business’ financial stress, along with comparisons to other similar businesses in your region and industry.
Although your business credit profile might vary from bureau to bureau, they are all trying to determine the same thing:
1. Can you repay a small business loan?
2. Will you repay a small business loan?
3. And what will you do if something unexpected happens?
Unlike an investor, a lender isn’t directly investing in your business; they are lending you money with the expectation that you will make all of the required periodic payments when due. This applies to the first payment whether that payment is due next week, in three days or at the end of the month. And, they want to know that you will be able to make those payments even if your circumstances change over the term of the loan.
Lenders and other creditors look at information reported to the credit bureaus to try to determine what you might do in the future based upon what you’ve done in the past, which makes it difficult to overcome a less-than-perfect or non-existent credit profile overnight. It takes time to build a strong credit profile.